Jeremy Hunt is meeting high street lenders in Downing Street amid growing pressure on the government to offer support for mortgage holders affected by rising interest rates.

The chancellor has ruled out a direct bailout to homeowners warning that it could exacerbate inflation, but he is likely to urge banks to relieve mortgage holders saddled with thousands of pounds in additional repayments.

One of the options set to be discussed would involve banks offering a holiday to mortgage holders, whereby their credit rating would not be hit if they temporarily switched to interest-only payments — something Labour has been calling for.

Harriet Baldwin, chairwoman of the Treasury committee, said banks should be obliged to show “forbearance” to people affected by the sharp rises in interest rates.

She said the Financial Conduct Authority, the banking regulator, needed to be “pretty rigorous” in holding banks to account amid questions over the gaps between interest rates offered to savers and those charged to borrowers.

She said homeowners should be able to have a “grown-up conversation” with their lender to discuss “a variety of things that they will do to help you through what is clearly going to be a difficult period”.

“One of the things we wrote to the regulator, the Financial Conduct Authority, about is making the changes that are necessary to put in, to almost enshrine in their rulebook the kind of forbearance that people were shown during the pandemic,” she told Today on BBC Radio 4.

The Bank of England raised interest rates to their highest level in over a decade yesterday. The Bank’s nine-strong Monetary Policy Committee (MPC) voted to increase rates by 0.5 per cent to 5 per cent in a move that will cost homeowners with variable and tracker mortgages an average of £600 more a year.

The cumulative effect of recent rate rises means that those not on a fixed rate are now typically paying about £6,300 more annually for their mortgage than they were two years ago.

Economists believe interest rates will have to climb to 6 per cent by the end of the year — the highest level since 2000 — to bring inflation back to the government’s 2 per cent target.

Andrew Bailey, the Bank governor, told workers they should not expect pay rises to keep pace with the rising cost of living, saying that inflation-level settlements were “unsustainable”.

The MPC’s move piles pressure on Rishi Sunak with less than 18 months left until a general election. Labour said that “next month it’s going to feel a lot worse” for millions of homeowners.

The prime minister said he took personal responsibility for the harsh measures needed to bring inflation back under control, saying he was “100 per cent on it”. Sunak admitted at The Times CEO Summit in London that his pledge to halve inflation by the end of the year had “got harder”, but later insisted: “It’s going to be OK.”

He urged voters to “hold me to account” on his progress towards his five priorities “in six months, nine months, a year, year and a half”. At that point, Sunak said, “you can make a judgment about how I’m doing”.

He appeared to rule out tax cuts in the autumn, saying: “It might sound great — ‘let’s cut your taxes over here, let’s spend some more money over there, let’s do massive pay awards for everyone in the public sector’ — it might feel great for a day, for a week, for a month ... pretty quickly it would turn out to have been a really bad idea.”

The prime minister also heaped pressure on supermarkets over high prices, saying that they needed to behave “responsibly and fairly”.

Sir Keir Starmer, the Labour leader, also attended The Times CEO summit. He ruled out offering mortgage holders financial support, saying there were “problems” with the approach advocated by the Liberal Democrats, who have called for a £3 billion support scheme for vulnerable homeowners. “There’s no answer to this that doesn’t go with economic stability,” Starmer said.

The MPC’s base rate increase from 4.5 to 5 per cent was the single biggest jump since February, taking interest rates to the highest level since September 2008. Seven committee members, including Bailey, voted for the increase, while two committee members thought rates should stay unchanged.