Rachel Reeves has demanded that banks are forced to help families struggling with crippling mortgage hikes.
The Shadow Chancellor unveiled a plan to ease the “Tory mortgage penalty” amid worries people may lose their homes.
The Bank of England on Thursday expected to raise the base interest rate by at least 0.25 points to 4.75%, leading to another hike for many mortgage payers.
Ms Reeves said if Labour was in power it would require lenders to allow borrowers to switch to interest only mortgage payments temporarily or lengthen the term of their mortgage if they are in difficulty.
They would be able to switch back if the situation got better.
Banks would have to wait a minimum of six months before initiating repossession proceedings. Labour would also instruct the Financial Conduct Authority to issue urgent guidance so that borrowers would not see their credit rating affected if they do change to interest only or lengthen the term.
Ms Reeves said: “Across Britain, people are being hit hard by a Tory mortgage penalty. Unlike this government, Labour will not stand by as millions face a mortgage catastrophe made in Downing Street.
“Labour will restore the economic and financial security that families deserve. Our five-point plan to ease the Tory mortgage penalty offers practical help now, while our commitment to fiscal responsibility and growth will secure our economy for the future.”
Annual mortgage repayments are set to rise by £2,900 for the average household remortgaging next year, according to economists at the Resolution Foundation.
Options such as extending a mortgage term can ease homeowners' monthly payments in the short-term.
But they could also hit retirement plans or leave borrowers paying the lender more in interest over the course of the mortgage.
Labour said they could achieve the changes through working with the FCA rather than introducing new legislation.
Ms Reeves added: “With food and energy prices so high, higher mortgages are the last thing families need.
“But it will not be the last burn from Tory economic failure they feel.
“Because over the last 13 years, this government have failed to secure our economy, failed families and failed businesses.
“Instead of squabbling over peerages and parties and ruling out any action on mortgages, the Tories should be taking responsibility and acting now.”
A Conservative Party spokesman said: “We have already taken immediate action to support families and to make the mortgage market more flexible.
