The boss of one of the ‘big four’ banks has come under fire after saying it ‘isn’t that difficult at the moment’ to get onto the property ladder.
NatWest chairman Sir Howard Davies was speaking on BBC 4’s Today radio programme after being asked by the show’s presenter Amol Rajan about Britain’s housing market.
Mr Rajan asked: ‘When do you think it’s going to be easier for people to get on the property ladder in this country?’
Sir Howard replied: ‘Well, I don’t think it’s that difficult at the moment.’
The bank’s boss’s response has been questioned by experts in the property market who suggested they did not reflect the circumstances of ’99 per cent of the population’.
Sir Howard’s reply also prompted a shock response from the show’s presenter.
Mr Rajan said: ‘To buy a house in this country, are we living in the same country or are you reporting from overseas?’
The bank boss said in response that house buyers need to save their money to buy a property.
‘You have to save and that is the way it always used to be,’ he said.
Knighted boss: Sir Howard Davies said ‘it’s not that difficult’ to get on the property ladder
However, Mr Rajan went on to highlight the average earnings multiple required to pay a house – which can sometimes be as high as nine times to buy an average property in some areas.
The average London home now costs 12 times the average London wage.
Banks typically lend up to 4.5 income multiplies, meaning it is difficult for many first-time buyers to get onto the property ladder in these areas without financial help.
Mr Rajan explained: ‘I am thinking about our listeners under the age under 40, who would say ‘have you tried buying a house in a major city in this country?’.’
You have to save and that is the way it always used to be
Howard Davies
And Sir Howard said: ‘Yes, undoubtedly, but what we saw in the financial crisis was the risk of having people being able to borrow 100 per cent in order to get on the property ladder – and then suffering severe falls in their equity value of their houses and having to leave, and having a bad credit record etc.
‘So there were dangers in very, very easy access to mortgage credit, so I total recognize that there are people who find it very difficult to start the process.
‘They will have to save more, but that I think is inherent in the change in the financial system due as a result of the mistakes that were made in the last financial crisis and we have to accept that we are still living with that.’
Halifax said today that house prices defied expectations, rising 1.7 per cent in 2023
Sir Howard is a British historian and author, who is the chairman of NatWest Group and the former director of the London School of Economics. He was the first chairman of the Financial Services Authority.
Experts suggested the bank boss may be out of touch with the rest of the country.
Jonathan Burridge, of mortgage brokers We Are Money, said: ‘A note for their PR director: it is probably not wise for a Knighted director of a behemoth bank with a salary package of millions of pounds to comment on the financial issues faced by the other 99 per cent of the population, especially those that have seen rampant property price inflation for over a decade and spiralling inflation.’
Meanwhile, Mark Harris, of mortgage brokers SPF Private Clients, said: ‘The market is polarised between the ‘haves’ and ‘have nots’.
‘Those with higher incomes and/or higher deposits and/or access to those willing and able to support them, will find it easy to get on the property ladder should they find something they wish to buy.
‘Those in a less fortunate position – i.e. lower incomes/less disposable income or renters unable to save for a deposit and don’t have financial assistance from family -, will find it more difficult. But is that any different to ten years ago?
‘Lenders are cash rich and want to lend to the right borrower.
‘While property prices are higher and wages haven’t increased in line with these, rents are higher and the general cost of living has increased but the ‘haves’ have probably benefitted from house price inflation from parents who have been able to gift deposits and use their income to assist.’
Sir Howard told house hunters that they ‘will have to save more’ to achieve their property goals
North London estate agent Jeremy Leaf, said: ‘Lenders have got smarter and built in buffers to protect borrowers which is the main reason why repossessions have been low and has helped ensure the market hasn’t corrected or collapsed.
‘We find, on the ground, that first-time buyers go in with their eyes much more open than before and are nervous about overstretching themselves.
‘That said, first-time buyers remain keen to buy if they can afford to, mainly because of high rents and the fact that they don’t want to keep on paying the landlord’s mortgage rather than their own.’
Sir Howard’s comments come as house prices defied expectations, rising 1.7 per cent in 2023, according to the latest figures from Halifax.
The mortgage lender said average prices rose for the third consecutive month in a row, going up by 1.1 per cent in December alone.
The typical UK home now costs £287,105, which is £4,800 higher than it was in December 2022, but still £7,000 below the peak recorded in summer 2022.
