'Too hot' Why interest rates could spell a big headache for Sunak

If the heads of some of Britain's biggest banks were nervous as they entered Downing Street for a crunch meeting on the mortgage crisis last Friday, they were quickly reassured.

- Kiran Stacey and Heather Stewart

Jeremy Hunt hosted six executives and one senior regulator after a week of economic bad news, when inflation remain steady at 8.7%, the Bank of England increased the base rate to 5% and the cost of mortgage deals kept going up.

But the chancellor was not there to read the riot act. Instead, he wanted to agree a voluntary "mortgage charter", under which banks would offer borrowers greater flexibility over repayment terms and repossession proceedings. Banks also agreed not to mark down the credit scores of anyone who takes advantage of such flexibility.

"We agreed some very important things for people who are worried about their rates going up," Hunt said afterwards.

But others believe the government's response has been limp. Rachel Reeves, the shadow chancellor, called last Friday's announcement "weak".

However, the approach being taken by Hunt and the prime minister, Rishi Sunak, reflects the political reality they face. Having promised to halve inflation to about 5% by the end of the year, Sunak is having to acknowledge that control over inflation lies largely with the Bank of England.

Nothing illustrated this tension better than last Thursday's awkward interview between the foreign secretary, James Cleverly, and the BBC's Amol Rajan.