THE chairman of Natwest who earns well over £700,000 a year has claimed it is “not difficult” to buy a house in the UK.
Howard Davies claimed on Radio 4 it was not hard for people to get on the housing ladder, despite the fact the average house price in the UK was £287,105 last month.
Property values were reported to have increased by 1.7% on average across 2023. The average home is now valued £4800 higher than at the end of 2022, according to the Halifax house price index.
Homeowners are now also facing a £19 billion increase in mortgage costs as millions more fixed-rate deals expire.
Up to 1.5 million households are expected to reach the end of cheaper deals in 2024, with an increase in annual housing costs of about £1800 for the typical family, according to the Resolution Foundation thinktank.
Davies, who is a former director of the London School of Economics, was asked when it was going to get easier for people to buy a home in the UK.
He said: “Well, it’s not that difficult at the moment.”
The shocked presenter raised his voice in disbelief, outlining that listeners under the age of 40 would not agree with Davies given the multiple of average earnings you now require to get on the ladder.
Davies went on: “You have to save, and that’s the way it always used to be.”
Sir Howard Davies, chair of NatWest Bank, has just told Radio 4 that he does not think it is hard for people to get on the housing ladder in the UK. That is a staggering demonstration of the disconnect between bankers and reality in this country.
— Richard Murphy (@RichardJMurphy) January 5, 2024
Davies said the 2008 financial crisis had led to safeguarding against “dangers in very easy access to mortgage credit”.
He added: “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.”
The average house cost £4200 in 1971. The typical UK house price in December 2023 was £287,105, with first-time buyers finding it practically impossible to gather together a deposit without borrowing from family or seeking help from government schemes.
People have branded Davies “out of touch” while economist Professor Richard Murphy said it was a “staggering demonstration of the disconnect between bankers and reality in this country”.
Stephen Perkins, managing director at Yellow Brick Mortgages, added: "It is tiring reading such comments from people who bought their first house for around £10,000 with a minimal deposit and a mortgage at two to three times their income and who are completely out of touch with the challenges first-time buyers face getting on the housing ladder.
"Without help from the Bank of Mum and Dad or inheritance, it is incredibly hard to save the £30k or so deposit often needed to be able to buy an average-priced house, especially if privately renting."
Elsewhere on the Today programme, Davies claimed UK interest rates were low for a decade because there was a glut of savings and a shortage of investors to lend that money to.
Murphy said his comments showed he “doesn’t know how banking works”.
In a thread on Twitter/X, he said: “Since 2014 the Bank of England has acknowledged that when a bank makes a loan it does not use saver’s funds. Instead, new money is created by the exchange of promises to pay between the bank and the borrower. As it noted, that is how all commercial bank money is created.
“Sir Howard Davies clearly either a) does not know this or b) thinks that he can ignore reality when offering economic arguments on Radio 4. Either way, he obviously presumes his ignorance will not be spotted, except I did.
“What is more, even if Davies was right, his argument was absolutely wrong. Savings have gone up since 2020 and investment down. The savings glut has grown. So there was no case for banks to raise rates, using his argument, which should be a little embarrassing for him.
“Davies has been chair of NatWest, Director of the London School of Economics and Director of the Financial Services Authority but he either does not know how banking, markets and central banking work, or pretends he does not when making his comments. I don’t know which.”
Davies 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.
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 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, Davies 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.”
