Howard Davies, chairman of Natwest Group Plc.
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The chairman of one of Britain’s biggest banks faced backlash on Friday after he said it was “not that hard” to get on the property ladder.
NatWest Chairman Howard Davies told the BBC’s “Today” program that the current economic landscape — which has seen interest rates rise to a 15-year high — is little different from other periods in history.
“I don’t think it’s that difficult at the moment,” Davies said when asked when it might be easier for Britons to buy a property.
“You have to economize and that’s how it’s always been done,” he added.
UK mortgage rates have been largely held steady at above 5% from April 2023, with some lenders just this week cutting rates in anticipation of rate cuts by the Bank of England. Higher rates, in turn, have limited inventory available in the market.
Meanwhile, higher inflation and the cost of living crisis has made it harder for would-be homebuyers to save the minimum 10% deposit usually required to buy a home.
Davies acknowledged that consumers today will have to save more for their down payment due in part to new protections imposed in the wake of the financial crisis. However, he argued that the landscape is now safer for consumers as well.
“There were risks in very, very easy access to mortgages,” he said.
“I fully recognize that there are people who are finding it very difficult to start the process. They should save more. But that is, I think, inherent in the change in the financial system as a result of the mistakes made in the last global financial crisis and we have to accept that we are still living with it,” Davis said.
However, the comments caused an uproar on social media, with critics describing Davies as out of touch.
Ben Twomey, chief executive of the Generation Rent campaign, said in one Position that Davies had no idea what it was like for tenants hoping to earn their first step on the property ladder.
“What planet does he live on? I wonder how often Sir Howard talks to tenants as we transfer a third of our salary to landlords and struggle to pay our sky high bills,” Twomey said.
Richard Murphy, a political economist and professor at the University of Sheffield in the United Kingdom, is described the comments as “shocking evidence of the disconnect between bankers and reality in this country”.
The average property in the UK currently costs £287,105 ($366,357), according to figures was launched on Friday by Halifax, the UK’s biggest mortgage lender. Costs in major cities, however, are even higher, with the average London home now costing £528,798.
Richard Donnell, chief executive of Zoopla, told CNBC on Friday that there is likely to be an increase in property purchases in 2024 as a result of the easing of interest rates. However, it noted that the outlook remained “challenging” due to reduced sales volumes in 2023.
“Only one million people moved into their homes last year,” Donnell said.
“Hopefully we will increase the volume of sales [in 2024]because the adjustment from mortgage rates from 2% to 4, 5, 6% mortgage rates was never going to be a one-year, done-and-done thing,” he added.