05 January 2024

‘Not that difficult’ to get on property ladder, NatWest chief claims

05 January 2024

It is not “that difficult” to get on the property ladder in the UK, the chairman of NatWest has claimed.

Sir Howard Davies, chairman of the major retail bank, said prospective buyers have to save, and that “is the way it always used to be”.

It comes as property values were reported to have increased by 1.7% on average across 2023, with the average home valued £4,800 higher than at the end of 2022, according to the Halifax house price index.

Average house prices rose by 1.1% month-on-month in December, the third monthly rise in a row.

The typical UK house price in December 2023 was £287,105, up from £282,305 in the same month a year earlier.

They will have to save more, but that is... inherent in the change in the financial system as a result of the mistakes that were made in the last global financial crisis

Asked by BBC Radio 4’s Today programme when it will be easier for people in the UK to get on the property ladder, Sir Howard said: “I don’t think it is that difficult at the moment.”

Pressed about this claim, he added: “You have to save and that is the way it always used to be.”

Sir Howard continued: “What we saw in the financial crisis was the risk of having people being able to borrow 100% in order to get onto the property ladder, and then suffering severe falls in the equity value of their houses, and having to leave and having a bad credit record. So, there were dangers in very easy access to mortgage credit.

“I totally recognise that there are people who are finding it very difficult to start the process, they will have to save more, but that is, I think, inherent in the change in the financial system as a result of the mistakes that were made in the last global financial crisis.”

Sir Howard also faced questions about the fallout of the debanking saga, in which former Ukip leader Nigel Farage revealed Coutts, a luxury bank owned by NatWest, was planning to close his account.

Mr Farage claimed it was due to his political opinions, but a BBC article appeared soon afterwards claiming the account was closed for commercial reasons.

The bank’s former chief executive Dame Alison Rose resigned after she admitted she had spoken to a journalist about Mr Farage’s relationship with Coutts.

Asked whether it was reasonable for the banking giant’s board to say they had full confidence in Dame Alison after the reports emerged, Sir Howard said: “I continue to say that the judgment that we made at the time was a reasonable one.

“At the time what we also said was that we wanted an independent legal review, which we commissioned, to be able to satisfy ourselves what was said and what was not, because it was not remotely clear at the time.”

He was also pressed on whether the review carried out by lawyers on behalf of the bank should have interviewed Mr Farage.

Law firm Travers Smith found failures in how the bank treated confidential information and how it communicated with Mr Farage.

Sir Howard responded: “That was a matter for them as to what they thought they needed to understand about the decision-making processes within the bank, and I think it was a very thorough report, it was an independent report, and I have no reason to question the conclusion that they reached.”

Mr Farage criticised Sir Howard’s remarks, telling GB News: “It is all but impossible for young people to get on the property ladder, and what that has done is it has destroyed the culture of thrift.

“Howard said save, but I have spoken to young people who have said that there is no point saving because we are never going to save enough to even get the deposit that is now required.”

Campaign group Generation Rent were also critical of the comments.

Ben Twomey, its chief executive, said: “What planet does he live on? This is astounding to hear from a senior banker.

“We are in a cost-of-renting crisis that is making it incredibly hard for people to buy a home as we hand a third of our wages every month over to our landlord.

“Interest rates have increased but house prices have yet to correct, meaning we still need to save for a huge deposit, but also would need a high income to afford monthly mortgage repayments.”

Figures from the Office for National Statistics (ONS) show just how much house prices have grown over the last decade.

Full-time employees in England could expect to spend around 8.3 times their annual earnings buying a home in 2022, according ONS.

A decade earlier, in 2012, the figure stood at 6.8 times annual earnings, while 25 years ago in 1997 it stood at 3.5.

The trend is similar in Wales, though the affordability gap is not quite so large, standing at 6.2 times annual earnings in 2022, up from 5.6 in 2012 and 3.0 in 1997.

Across England and Wales, while average earnings doubled between 1997 and 2022, average house prices increased by four-and-a-half times.

“Over the last 25 years, housing affordability has worsened in every local authority, especially in London or surrounding areas,” the ONS added.

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