Liz Truss to hold emergency talks with OBR after failing to calm markets

In a particularly awkward exchange on BBC Radio Stoke, there were long silences when she was asked about hikes in mortgage payments, which will increase as interest rates go up, dwarfing any savings that her measures may have helped people make.

The FTSE 100 slumped by 160 points to 6,858, matched by a similar 2.4% fall in the value of the top 500 US firms. Economists and investor groups said the lack of stability in a previously robust financial centre like the UK should be a warning against excessive risk-taking by governments and financial institutions.

Banks in the UK withdrew mortgage loan products at an unprecedented pace, and the average price for a two-year fixed rate mortgage jumped above 5%. More than 40% of available mortgages have now been withdrawn from the market, while providers including Santander, Nationwide and HSBC have repriced loans.

Simon Wolfson, the chief executive of Next and a Tory peer, warned that the UK could be heading for a second cost of living crisis next year as the slump in the value of the pound drives further price rises.