The chancellor will urge the UK’s largest banks to do all they can to support those struggling to pay their mortgage during the cost-of-living crisis when he holds his first talks with chief executives on Wednesday.
Jeremy Hunt will host a roundtable with heads of major mortgage lenders, including Debbie Crosbie of Nationwide, HSBC UK’s Ian Stuart and NatWest’s Alison Rose to discuss the impact of rising interest rates and living costs on customers.
The consumer champion Martin Lewis has also been invited to No 11 after warning that rising energy bills, inflation and interest rates could result in a “perfect storm” for homeowners in the spring.
Richard Lloyd, the interim chair of the Financial Conduct Authority (FCA), which regulates and supervises mortgage lending, will also be attending alongside bosses from Lloyds, Santander UK and Barclays.
The chancellor is expected to tell lenders they should do everything they can to support borrowers, including through interest-only payments that could temporarily reduce their monthly bills during the economic downturn.
Homeowners have been hit with higher mortgage payments as a result of the disastrous mini-budget in September, which spooked financial markets and pushed up borrowing costs. It increased payments for borrowers on variable rate mortgages as well as those that have had to remortgage at higher rates.
While borrowing rates have eased since then, average five-year fixed mortgage deals are still hovering at about 5%, putting further strain on households already facing soaring energy and food bills that have pushed inflation to a 41-year high of 11.1%.
Banking executives are expected to come armed with data outlining the health of their mortgage lending books, as Britain braces for the longest recession in a century.
Most lenders are already contacting customers that might be at risk of falling behind on payments, but some say they have been cautious over the kind of help they might provide to vulnerable customers due to a lack of guidance from the regulator.
While the FCA instructed lenders to be flexible during the Covid crisis by providing payment holidays and interest-only arrangements, it has been less prescriptive on the kind of support that should be provided during the cost-of-living crisis.
Some banks have said there are still questions about how targeted their support should be, while others are concerned that currently they can only offer limited repayment holidays before it affects a customer’s credit score.
“I’m going into this meeting with a view that I want to be there for customers: allow me to use my tools, give me your blessing to use them,” one executive told the Guardian.
Wednesday’s meeting will be Hunt’s first roundtable with banking bosses, having put off most meetings until after his 17 November autumn statement.
He has so far been less keen to meet City leaders than his predecessor, Kwasi Kwarteng, who held a string of talks with banks and insurers as he tried to drum up support for the former prime minister Liz Truss’s short-lived economic plans.
The Treasury and the FCA declined to comment.