Banking bosses said a meeting with Jeremy Hunt in Downing Street on Friday was “very productive” as the chancellor attempts to quell the growing crisis in the mortgage market sparked by rapidly rising interest rates.
Hunt held the meeting to ask banks and building societies if they could do more to support struggling households after the Bank of England intensified its battle to tame high inflation with a half-point interest rate increase to 5% on Thursday.
Among the attenders at the meeting were the NatWest chief executive, Alison Rose, the Lloyds CEO, Charlie Nunn, Barclays’ UK chief executive Matt Hammerstein, Virgin Money’s David Duffy, Nationwide’s Debbie Crosbie and Mike Regnier of Santander UK. Nikhil Rathi, the head of the Financial Conduct Authority, the City regulator, also attended.
Hunt hopes the lenders will be able to offer extra help for struggling homeowners who have seen a sharp rise in monthly payments on their mortgages.
Rose said: “We had a very productive meeting. We’re doing everything we can to help customers and help with the anxieties.”
She added that banks were “very keen” to help everyone.
Nunn said that bosses had held a “good working discussion with the chancellor”.
A senior industry figure with knowledge of the meeting told the Guardian: “Discussions fed more into how we communicate what we already offer customers in hardship rather than changing commitments we have in place for those who are struggling.”
The Bank of England has increased interest rates on 13 consecutive occasions in an attempt to calm rampant inflation. Official figures released on Wednesday showed annual inflation remained unchanged in May at 8.7%, well above the Bank’s target of 2%. Economists had predicted a fall in inflation to 8.4%.
On Thursday the Bank raised its benchmark rate by half a percentage point to a 15-year high of 5%, and financial markets are now predicting UK interest rates will hit 6% by the end of the year, and remain at that level until next summer.
Earlier this week, Hunt said the meeting with lenders would allow him 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”.
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He also said that “sadly”, the government could not “offer short-term mortgage support if it means inflation stays higher for longer. It would be self-defeating”.
On Friday, the average two-year fixed residential mortgage rate remained unchanged on the previous day, at 6.19% after recent rises, while the average five-year fixed rate edged up to 5.83% from 5.82% on Thursday, according to Moneyfacts.
Rosanna Bryant, a partner at the law firm Addleshaw Goddard, said: “The chancellor will want to see from the lenders that they will continue to support customers including those in financial difficulty.
“Banks and other mortgage lenders will need to continue to ensure that borrowers are supported in the most appropriate way possible by putting their customers’ needs first. This latest increase to the Bank Rate by 0.5 percentage points, to 5% will inevitably lead to increased weakening of UK households’ resilience and a coordinated effort must be made to support as many households as possible.”
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