Proactive Investors - NatWest Group PLC (LON:NWG) chairman Howard Davies has claimed it is not “that difficult” to get on the housing ladder
“I totally recognise that there are people who are finding it very difficult to start the process,” he told BBC radio on Friday, “they will have to save more”.
“You have to save, and that's the way it always used to be.”
Average mortgage rates have fallen to a near-seven month low this week as lenders compete in cutting prices against the backdrop of an expected cut to base interest this year.
However, at 5.87%, these remain well above rates seen in recent years, meaning roughly 1.6 million existing borrowers due to remortgages this year will face a jump in payments.
Average house prices themselves have risen by around 240% since the year 2000 meanwhile, as per Office for National Statistics figures, compared to a 112% increase in typical earnings over the same period.
Davies’s comments came as he spoke of “dangers” in lenders offering “easy access to mortgage credit”.
"It's not that difficult to get on the properly ladder."NatWest chair Sir Howard Davies tells @amolrajan people 'have to save and that's the way it always used to be'.
Watch the full exchange ⬇️#R4Today
— BBC Radio 4 Today (@BBCr4today) January 5, 2024
“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,” he said.
Davies did acknowledge that people have to save more now than they used to when looking to buy property, reasoning that this was due to changes within the housing market since the financial crisis.
So how much does it cost?
Britain’s average house cost £287,105 as of late December, according to Halifax, following three months of consecutive increases.
Lenders often offer prospective buyers loans of up to 90% of the value of their houses, though the lowest mortgage rates are typically reserved for those able to lay down larger deposits.
As per Moneyfacts, the lowest rate on such a deal, where a 10% deposit would equal an upfront payment of £28,710 based on current average selling prices, is offered by HSBC Holdings PLC (LSE:LON:HSBA) subsidiary First Direct.
This is for a five-year fixed-deal, which is priced at 4.69% and includes a product fee of £490.
Based on this, buyers would pay £87,855 over the five-year term, at £1,464.25 per month.
Indeed, rates have fallen in recent months, with HSBC becoming the first of the larger lenders to start offering deals with interest below 4% this week.
Describing the market as “pent-up”, Yellow Brick Mortgages managing director Stephen Perkins said cuts “should get more and more explosive" as competition hots up between lenders.