Homeowners struggling to pay their mortgages in the wake of Liz Truss’s “disastrous budget” should be helped out with grants of up to £300 a month, Lib Dem leader Ed Davey has told the Observer. In a bid to improve his party’s fortunes in “blue wall” seats where Tory voters have shown a willingness to switch parties, Davey said there was now a “mortgage penalty” on some householders after the mini-budget. He said there are people now “worried sick about how they will get by or even afford to stay in their homes”. In a speech on the economy on Sunday, he will call for a temporary £3bn mortgage protection fund to help homeowners who have seen a 10% increase in their mortgage repayments. He says it could be paid for by reversing cuts to the bank levy and bank surcharge since 2016. “The Conservatives have crashed the economy and that’s added hundreds of pounds to millions of people’s monthly mortgage payments,” he said. “Something has to be done, particularly for those who are really struggling or in danger of falling into arrears or even facing repossession. “The banks should pay their fair share. We bailed them out during the financial crisis, so they should be supporting families who are struggling in this crisis. It seems the right thing to do.” He insisted that the scheme would be “well targeted” and aimed at the quarter of households struggling the most with costs. He said that while it did not help renters, the Lib Dems already backed a series of measures designed to give them more certainty and power over their home. The party pointed to figures suggesting that the average two-year fixed rate has risen from 4.24% at the beginning of September to 6.55% now, adding an estimated £1,800 to a typical household’s annual mortgage bill by the end of 2023. About 1.2m households on flexible-rate mortgages have already seen their monthly payments rise, while 1.8m are more on fixed rate deals that will expire in the next year. “We’re seeing lifelong Conservatives, in all the seats we’re contesting in the blue wall and beyond, saying the Conservatives have just been chaotic,” said Davey. “There’s no doubt that lifelong Tories are really reassessing their votes and a lot of them are coming to us. I do think this is the type of approach that is needed to help those families. Many of them may have voted Tory in the past. Many may vote Liberal Democrat. But this is just the right thing to do.”