Rosalind Evans
Howard Davies, the chair of NatWest, was at the center of a heated controversy after suggesting that buying a property in Britain is “not that difficult.” His comments during a BBC interview on the “Today” program have ignited a fierce debate, with many accusing him of being out of touch with the harsh realities of the UK’s housing market. While Davies defended his stance by citing traditional saving practices for a down payment, critics argue that the current economic landscape, characterized by soaring interest rates and unaffordable property prices, paints a very different picture.
The chair of NatWest, Howard Davies, stirred a hornet’s nest when he asserted that purchasing property in the United Kingdom is, in his opinion, “not that difficult.” These remarks, made during an interview on the BBC’s “Today” program, have drawn intense criticism, with many viewing them as a stark misrepresentation of the challenges faced by those seeking to enter the property market in the UK.
Davies defended his statement by harkening back to traditional savings methods for a down payment, suggesting that this practice has always been integral to buying a home. “You have to save, and that’s how it always used to be,” he added. However, his comments have come under scrutiny in the current economic landscape, notably different from previous eras.
One of the key factors contributing to the difficulty in purchasing property is the surge in interest rates, which recently reached a 15-year high. U.K. mortgage rates have remained above 5% since April 2023, making homeownership less affordable for many. While some lenders have reduced rates in anticipation of potential interest rate cuts by the Bank of England, more is needed to alleviate the challenges in the housing market.
The situation is further exacerbated by rising inflation and a cost-of-living crisis, making it increasingly harder for prospective homebuyers to save the minimum 10% deposit typically required to purchase a home. Howard Davies acknowledged that consumers today would need to save more for their down payment, partly due to new financial protections after the global financial crisis. He argued that these changes had made the financial system safer for consumers, even though it necessitated a higher savings threshold.
Davies stated, “There were dangers in effortless access to mortgage credit.” He recognized the difficulties faced by those trying to enter the property market, noting that they would have to save more. However, he attributed this challenge to changes in the financial system resulting from the mistakes made during the last global financial crisis.
Despite his explanations, Davies’s comments have ignited a firestorm on social media, where critics have accused him of being out of touch with the struggles of ordinary citizens. Ben Twomey, the chief executive of campaign group Generation Rent, expressed his disbelief in a social media post, saying, “What planet does he live on? I wonder how often Sir Howard speaks to renters as we pass on a third of our wages to landlords and struggle to pay our soaring bills.”
Richard Murphy, a political economist and professor at the University of Sheffield, characterized Davies’s comments as “a staggering demonstration of the disconnect between bankers and reality in this country.”
The average property price in the UK currently stands at £287,105 ($366,357), according to figures released by Halifax, the country’s largest mortgage lender. However, prices in major cities, particularly London, are significantly higher, with the average London home now priced at £528,798.
Richard Donnell, the executive director of Zoopla, believes that property purchases may increase in 2024 due to easing interest rates. Still, he cautioned that the outlook remains “challenging” due to the suppressed sales volumes experienced in 2023.
“We only had a million people moved home last year,” Donnell said. “Hopefully, we just build back sales volumes in 2024 because adjusting from 2% mortgage rates to 4, 5, 6% mortgage rates was never going to be a one-year, once-and-done thing.”
Howard Davies’s assertion that purchasing property in Britain is not as challenging as some claim has sparked a vigorous debate and raised questions about the divide between his perspective and the reality many aspiring homeowners face. With the complexities of the housing market, rising interest rates, and affordability concerns, the discourse surrounding property ownership in the UK still needs to be settled. Policymakers, financial institutions, and housing advocates must address these challenges to ensure a more accessible and equitable housing market.
