The Liberal Democrats have called on the Chancellor to hold an emergency summit with banks to ensure homeowners will not see their mortgage payments spike.
The call from the country’s third biggest parliamentary party comes as the pound fell 0.8% to as low as $1.211, a 14-month low, as the yield on 10-year UK gilts — a measure of government borrowing costs — rose 3 basis points to 4.87%, near its highest level since 2008.
Bond markets have taken fright over the impact widespread global tariffs might have if incoming US President Donald Trump carries through his threats.
As part of that assessment, investors are looking again at Chancellor Rachel Reeves’ October Budget plans to spend £70bn over five years and pricing UK borrowing at a higher rate.
Two-year swap rates rose to 4.278% on 9 January from 4.069% a month ago, while five-year rates lifted to 4.147% from 3.810% over the same period, according to Chatham Financial.
Today, Virgin Money, Vida and Zephyr either pulled products or raised rates by as much as 25 basis points, citing rising swap rates in some cases.
Liberal Democrat Treasury spokesperson Daisy Cooper argues the time has come for Rachel Reeves to wring assurances from lenders over home loan rates.
Cooper says: “The Chancellor’s budget has not worked and now many will be worried that they will have to pay the price through spiralling mortgage costs.
“After years of Conservative economic vandalism including their disastrous mini-budget, it is a price that many cannot afford.
An emergency summit with the banks must be convened so that mortgage payers can be reassured that they are not going to be subjected to yet another bout of spiralling costs.
“Rachel Reeves can no longer sit on her hands as this turmoil threatens to have real consequences for millions of homeowners.”
Markets forecast the government may be forced to raise taxes or cut spending if gilt borrowing costs maintain their high levels.
Prime Minister Keir Starmer argues his administration will stick to its spending targets.
The Prime Minister says: “In terms of the ruthless approach when it comes to finances and spending, yes, we will be ruthless, as we have been ruthless in the decisions that we’ve taken so far.
“We’ve got clear fiscal rules, and we’re going to keep to those fiscal rules.”
The last time a Chancellor was forced to meet bankers over mortgages was in the wake of former Prime Minister Liz Truss’s September 2022 Budget.
In July 2023, Chancellor Jeremy Hunt agreed a Mortgage Charter with 85% of the country’s home loan lenders to support borrowers who hit difficulties making their mortgage payments. That agreement remains in place.