By Kylie MacLellan
LONDON (Reuters) – The chairman of British bank NatWest was criticised by a leading opposition politician for being out of touch on Friday after he said it was not “that difficult” to be able to afford to buy a house in Britain.
According to Office for National Statistics data, full-time employees in England could expect to spend around 8.3 times their annual earnings buying a home in 2022, compared to 3.5 times in 1997.
While earnings have risen faster than house prices since then, making it slightly easier to find a deposit, the Bank of England has raised interest rates to a 15-year high of 5.25%, increasing monthly mortgage payments for new buyers.
Meanwhile the cost of renting has soared, with private rents rising by 6.2% in the year to November, the biggest annual increase since the series began in 2016.
Asked on BBC radio when he thought it would be easier for people to get on the property ladder, NatWest Chairman Sir Howard Davies said: “I don’t think it is that difficult at the moment … you have to save and that is the way it always used to be.”
Davies pointed to the dangers of easy access to mortgage borrowing which led to the 2008 financial crisis.
“I totally recognise that there are people who find it very difficult,” he added. “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.”
The opposition Labour Party’s finance spokeswoman Rachel Reeves said Davies, who earns around 750,000 pounds ($950,000) a year, was out of touch.
“I don’t think those comments are in tune with the reality faced by millions of people in Britain,” she told GB News. “Many, many people will find those remarks quite out of touch with the situation they and their family face.”
Data from mortgage lender Halifax on Friday showed British house prices rose in annual terms in December for the first time in eight months.
Britain’s housing market boomed during the COVID-19 pandemic before demand fell as the Bank of England pushed up interest rates to counter a surge in inflation across the economy.
However, a fall in mortgage rates in recent weeks has prompted some buyers to return to the market.
Davies later said in a statement that he had been thinking of this when he made his remarks and had not meant to underplay the challenges people face.
“My comment was meant to reflect that in this context access to mortgages is less difficult than it has been. I fully realise it did not come across in that way,” he said.
($1 = 0.7892 pound)
(Reporting by Kylie MacLellan; additional reporting by Lawrence White and David Milliken; editing by Jonathan Oatis)