Chancellor rules out mortgage relief scheme but agrees to meet with lenders over soaring rates

Chancellor Jeremy Hunt has ruled out an official mortgage relief scheme, saying an introduction could further push up inflation, but said he would meet with lenders this week to see what help can be offered to struggling borrowers.

Official figures released this morning show that CPI inflation was unchanged at 8.7% in May, despite markets predicting a continued fall, while core inflation rose.

However Hunt said a mortgage relief scheme would "make inflation worse, not better".

Speaking in Parliament yesterday, Conservative MP Sir Jake Berry asked Hunt to consider "reintroducing a bold Conservative idea of mortgage interest relief at source", adding that "all the other money we have spent helping [families] will be wasted if they lose their home".

Replying, Hunt said: "Those kind of schemes, which involve injecting large amounts of cash into the economy, would be inflationary. As much as we sympathise with the difficulties and do everything we can to help people seeing their mortgage costs go up, we won't do anything that would mean we prolong inflation."

However, the Chancellor has agreed to meet with mortgage lenders to discuss borrowers who are struggling to pay their mortgages and ask "what flexibilities might be possible for families in arrears".

Earlier this week, the average rate for a two-year fixed-rate mortgage rose to above 6%.