NatWest’s chairman claimed that jumping on the property ladder is not that difficult, even as data shows that it takes around 10 years to save for a deposit amid rising house prices.
Sir Howard Davies said people “have to save and that is the way it always used to be” if they want to buy their first home.
He told BBC Radio 4’s Today programme: “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.
First-time homebuyers typically needed to save a deposit of 20% to buy a home in 2022, according to the latest data from Statista.
The average first-time buyer deposit in the UK is around £61,000 but it varies widely depending on where you’re planning on buying a home.
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It will come at no surprise that London tops the list, with prospective homeowners requiring over £100,000 just to put as a deposit. The North East is the most affordable, with a deposit of a bit over £26,000 being enough to secure a mortgage.
However, the average time it takes to save for a home deposit in England has climbed to around 10 years.
In 2012 it would typically take 6.8 years to save for a deposit for a mortgage but higher house prices outstripping earnings, that figure has been pushed to 9.6 years, according to figures from campaign group Generation Rent.
Torsten Bell, head of think tank Resolution Foundation, also highlighted that the time required to save for a typical first-time buyer deposit has spiralled in recent years.
Again, London was the worst-affected region, with the average time before someone was able to step on to the property ladder put at 18.3 years.
Nationwide has said that between the start of the pandemic and the end of 2022, house prices increased by 19%, while incomes rose by only 9%.
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“A 20% deposit on a typical first-time buyer home is now equivalent to 112% of the pre-tax income of a typical full-time employee, a similar level to a year ago, and only modestly below the all-time high of 117% recorded earlier in 2022,” Andrew Harvey, a senior economist at Nationwide, said.
The average house in the UK currently costs around nine-times average earnings. The last time house prices were this expensive relative to average earnings was in the year 1876, nearly 150 years ago, according to Schroders.
NatWest chair admitted people had to save more, but said it was also due to fundamental changes in the housing market seen in the wake of the financial crisis.
“What we saw in the financial crisis was the risk of having people being able to borrow 100% 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, very easy access to mortgage credit,” Davies added. As chairman of NatWest, he receives a salary of more than £750,000 a year.
The average price of a property in the UK is currently £287,105, according to figures released on Friday by Halifax.
After sparking anger with his comments, Davies backtracked on his remarks that it’s not “that difficult” to buy a home and people just have to save for it.
In a sort of a mea culpa, he said: “I fully realise it did not come across in that way for listeners and as I said on the programme, I do recognise how difficult it is for people buying a home and I did not intend to underplay the serious challenges they face.
“People have to save much more than they did in the past and that is tough for first-time buyers. The role for banks in today’s environment is to lend responsibly and support customers to build a savings habit and move towards home ownership.”
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