UK chancellor Jeremy Hunt to meet lenders as mortgage crisis deepens

Key events

We are hearing that the breakfast meeting between Jeremy Hunt and mortgage lenders is due to start at 8am.

Those at the meeting include Nikhil Rathi, head of the Financial Conduct Authority, as well as bank chief executives including Charlie Nunn of Lloyds Banking Group, Debbie Crosbie of Nationwide, Britain’s biggest building society, Alison Rose of NatWest Group, David Duffy of Virgin Money and Mike Regnier of Santander UK (the Spanish bank’s UK head).

Introduction: Hunt to meet mortgage lenders today

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The UK chancellor, Jeremy Hunt, is meeting mortgage lenders this morning and will ask them if they can do more to support struggling households after a shock half-point interest rate hike to 5% yesterday, which deepened the mortgage crisis.

The financial markets are predicting UK interest rates will hit 6% by the end of the year, and remain at that level until next summer.

Hunt is meeting large lenders including HSBC and Santander in Downing Street, amid growing pressure on the government to act. Both he and Rishi Sunak, the prime minister, have ruled out a financial intervention, after the Bank of England hiked rates for a 13th time in an attempt to bring down stubbornly high inflation.

Labour has called for banks to be forced to help struggling mortgage holders, while some backbench Tories have demanded support for those borrowers.

However, the chancellor is expected to use the meeting in No 11 to press lenders on whether they are living up to their commitments to offer tailored support to those struggling to pay.

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Earlier this week, he said:

I will be meeting the principal mortgage lenders to ask what help they can give to people who are struggling to pay more expensive mortgages and what flexibilities might be possible for families in arrears.

Harriett Baldwin, a Conservative MP and chair of the Treasury select committee, said it was important that banks show people forbearance, as they did during the Covid pandemic, but rejected the idea that lenders should be instructed by the Financial Conduct Authority or the government to do so. She said people who are worried about their rising mortgage costs should speak to their lenders themselves.

Talking on BBC radio 4’s Today programme, she said:

It is very important that he [Hunt] speak to them this morning.

We’re planning another session with the mortgage lenders [at the committee] because one of the things that we wrote to the regulator about, the Financial Conduct Authority, is making the changes that are necessary to put in, almost enshrine in their rulebook, the kind of forbearance that people were shown during the pandemic

There will be a lot of your listeners who are worried about that renewal of their fixed rate or their on a variable rate. If you are worried, the first thing you should do is contact your lender because it won’t affect your credit record. You should have a grown up conversation with them. And there will be a variety of things that they will do to help you through what is clearly going to be a difficult period.

She added:

We just had a big debate about how independent do we want our independent regulators to be and where both the government and the opposition ended up, was that it’s best to leave the regulators to be independent and not to take a call in power as it were.

She said a new consumer duty will apply to banks from next month that will “require banks to demonstrate how they are treating their mortgage customers with the right degree of forbearance during this difficult time”.

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Meanwhile, retail sales in Great Britain were better than expected, rising by 0.3% in May, following April’s 0.5% increase. The Office for National Statistics said online retailers selling outdoor-related goods and summer clothing had strong sales, boosted by warmer weather.

Food sales were down 0.5%, despite increased spending on takeaways and fast food because of the extra bank holiday for the king’s coronation; however retailers also indicated that the increased cost of living and food prices continued to affect sales volumes, the ONS said.

Erin Brookes, European retail and consumer lead at the professional services firm Alvarez & Marsal, said:

The King’s coronation was cause for celebration across the High Street as the extra bank holiday boosted sales in May. With consumers in a festive mood for the once-in-a-lifetime event, and good weather throughout the month, retailers saw elevated demand for outdoor goods and summer clothes.

The challenge for retailers will be to continue to attract footfall as the macroeconomic environment worsens. A well-managed blend of newness will drive consumer interest even when demand is weaker, alongside a core assortment to maintain loyalty and drive healthy margins. Summer sales have also begun earlier this year as retailers seek to rotate stock – those who can do this effectively and avoid costly warehousing will emerge as winners.

The Agenda