Homeowners struggling to pay their mortgages amid rising interest rates should be able to apply for a £300-a-month grant, according to the Lib Dems.

Under new proposals, the grant would be available to people whose mortgage payments had risen by more than 10% of their income.

It could be paid for by reversing tax cuts for banks, the party said.

Sir Ed Davey commented: “No family should face losing their home because of the Conservative’s reckless mismanagement of the economy.”

The Liberal Democrat leader continued: “I am quite alarmed that the Conservatives who caused this mess are not actually trying to help.”

Chancellor Jeremy Hunt is due to deliver an autumn budget on 17 November but has already warned of “eye-wateringly difficult decisions”.

The decision to hold a budget was taken after the tax plans of Liz Truss sparked turmoil in financial markets.

Sir Ed argued told the BBC that Conservative actions had “added hundreds [of pounds] to people’s monthly mortgages”.

“The government has a responsibility to step in and fix their own mess, by providing grants to those struggling to afford eye-watering mortgage hikes.”

Under the Liberal Democrat’s mortgage protection fund, grants would be offered to homeowners to protect them from losing their homes or falling into arrears.

The party estimates this would cost £3bn and says it could be paid for by reversing cuts to the bank levy and bank surcharge.

A homeowner is considered to be in arrears if they miss two or more months’ repayments, However, lenders are required to make reasonable attempts to reach an agreement with those struggling to meet their payments.