David Cameron urged banks and building societies yesterday to ease the burden on homeowners facing a sharp increase in mortgage interest payments in the coming months.

An estimated 1.4 million households are expected to reach the end of fixed-rate mortgage deals during 2008. They face an average jump of £200 in their monthly payment as they move to higher rates.

Speaking before talks with the Council of Mortgage Lenders (CML), the Conservative leader said that such an abrupt increase could be “the final straw” for many borrowers, stretching their budgets and, in some cases, forcing repossessions.

He called on lenders to offer financial advice to customers facing difficulties, provide them with a tapered transition to the new interest rate or even allow them to switch to an interest-only mortgage for a short period.

His appeal was met with a frosty reaction from the industry. The CML replied by lecturing the Conservatives on their “policy mistake” of cutting mortgage assistance benefits in the 1990s. A statement said that the Tories should consider addressing the “woefully inadequate level of state support” for struggling homeowners after cuts made in 1995 to income support for mortgage interest.

By suggesting that lenders phase in higher repayments next year for those in financial difficulty, Mr Cameron was offering the wrong solution, the CML said.

Mr Cameron said that mortgage resets next year would ratchet up the pressure on family budgets: “I believe we urgently need to take stock of this situation and together take steps to minimise the impact these higher mortgage bills might have.

“After all, it’s in no one’s interests if homeowners can’t keep up with their repayments. Because, let’s not forget, banks lose out, too, if mortgages are not repaid.”

Michael Coogan, the director-general of the CML, said that it was unclear whether the Conservatives were proposing help for all borrowers facing a payment shock, or only for sub-prime borrowers. He said that the UK mortgage market did not need to react in the same way as America’s to borrowers facing payment difficulties. The US Treasury said last week that it would freeze interest payments for struggling sub-prime borrowers, whose defaults kick-started the global credit squeeze.

Mr Coogan said: “We don’t think this is the right solution for borrowers with payment difficulties. Unlike the US, we do not need a systemic approach. There are other short-term solutions that depend on individual borrower’s circumstances.”

Brokers said that the policy would help only a minority of borrowers, because most homeowners switch to cheaper deals at the end of the mortgage term. David Hollingworth, of London & Country, said: “There are options already available, so the move would be pointless for most borrowers. However, trapped sub-prime borrowers who face a payment shock when they move to their lender’s standard variable rate could benefit.”