Martin Lewis has welcomed chancellor Jeremy Hunt’s agreement with mortgage lenders as spiralling interest rates risk destabilsing the economy.
In a summit with banks and building societies at Downing Street on Friday, Hunt said they agreed to implement a 12-month minimum grace period before repossessing homes.
Lenders also agreed to allow struggling borrowers to extend the term of their mortgages or move to an interest-only plan temporarily with “no questions asked, no impact on your credit score”.
The consumer champion said: “It looks like the chancellor has listened.”
A day earlier, the Bank of England raised interest rates for the 13th month in a row after data showed the downward trajectory of inflation has stalled.
The base rate hike to 5% will cause misery for homeowners who have to refinance their mortgages in the coming months, and raised fears that the British economy is heading for a recession.
About 2.4 million fixed-rate mortgage deals are due to expire before the end of 2024, with payments set to rise by £2,900 a year for the average household remortgaging next year.
The package was praised by Lewis.
He wrote on Twitter: “I met the chancellor on Wednesday and reiterated that the minimum we needed was to ensure that when people asked for help from lenders, they knew that if things changed, it wouldn’t be detrimental to their financial situation and their credit scores would be protected as much as possible.
“I’m pleased to see it looks like the chancellor has listened. ”
Opposition parties, however, were less impressed.
Labour said the measures were “weak” and the Lib Dems described the measures as a “sticking plaster for a gushing wound”.
The government has ruled out direct financial support for struggling mortgage holders – arguing it risks fuelling the inflation it is trying to combat – and has left the heavy lifting to the independent Bank of England, whose only lever to control inflation is nudging the cost of borrowing up and down.