The government cannot sit on the sidelines of the mortgage crisis – it must find solutions

The measures to help mortgage payers survive the crisis caused by rising interest rates announced by Jeremy Hunt are welcome – but they are only a start.

After talks with lenders in Downing Street, the chancellor said borrowers would be able to extend the term of their mortgages or move to an interest-only plan temporarily with “no questions asked” and without affecting their credit rating if the change is reversed within six months. Lenders also agreed to implement a 12-month minimum period from a first missed payment before repossessing homes without consent.

However, some banks already operate such measures – which is no surprise, since Mr Hunt made similar noises after meeting them last December. He said then: “We expect every lender to live up to their responsibilities and support any mortgage borrowers who are finding it tough right now.”

After Friday’s session, the chancellor said his “mortgage charter” would “give people a lot of comfort and stop people worrying about having conversations with their banks when they are worried about their financial situation”.

While any help is to be applauded, the government and the Financial Conduct Authority must ensure the banks uphold what is ultimately a voluntary agreement. If they do not, then lenders should be compelled to implement these measures. So too should the 25 per cent of the mortgage market not covered by the deal.

Rishi Sunak and Mr Hunt are right to reject calls by jittery Conservative MPs for a major government intervention on mortgages. They must ensure that fiscal and monetary policy are in sync. The dangers of them pulling in different directions were apparent when Liz Truss’s £45bn of unfunded tax cuts were at odds with the Bank of England’s attempt to keep a lid on inflation by raising interest rates.

Government support for homebuyers to cover higher mortgages would cost between £15bn and £20bn, three-quarters of which would go to the top 40 per cent on the income scale, according to the Resolution Foundation think tank. Such a move would be self-defeating, as it would almost certainly result in the Bank raising rates further, adding to the pain for those with mortgages, whose payments are already due to rise by an average of £2,900 a year. It would also lead to demands to protect renters, who are arguably a more deserving cause because they spend a higher proportion of their (smaller) incomes on housing costs than householders.

However, ministers need to go further. For example, they and the regulators should make sure that banks raise interest rates for savers as fast as they do for borrowers. Sadly, the Treasury had nothing to say on that after Friday’s meeting.

The shadow chancellor, Rachel Reeves, hit out at the measures as “weak”. The Lib Dems called them a “sticking plaster”. And more evocatively, one mortgage expert said it was “like using a water pistol to put out a fire”.

These groups may have vested interests, but the government should listen to their warnings. Tory MPs, with an eye on self-preservation at the next election, are already panicking that a lack of action now means they’ll get the blame for the misery coming down the tracks and face the consequences at the ballot box.

The government needs to do much more to match its words with actions. It should help mortgage payers on low incomes. It should beef up its little-used support for mortgage interest scheme, which provides a loan to cover interest payments a homebuyer on universal credit or pension credit cannot afford, which is repaid when the property is sold. The scheme’s £200,000 mortgage ceiling, which has been frozen for more than 10 years, should be increased and the loans should be turned into grants. These measures would help prevent people who lose their jobs as the Bank’s painful medicine takes effect from losing their homes too.

Mr Sunak and his ministers may try to divert attention from their limited action in the cost of living crisis by pointing the finger at others; they are already accusing the supermarkets of using high inflation to boost profit margins. That might be true, but ministers need to do more than scapegoating.

A national effort is required to come through the current storm, but it cannot be waged by anyone except the government. Ministers cannot sit on the sidelines directing others; sooner or later, they will need to get on the pitch.