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Barclays boss ‘is talking down market’
Robert Mendick, Chief Reporter15.12.08
THE HEAD of Barclays Bank was accused today of “talking down” the housing market after claiming property prices will drop by a further 15 per cent next year.
John Varley, the high street bank's group chief executive, said in an interview that Britain was only half way through a house price slump.
The claims, to be broadcast on television tonight, were immediately attacked by finance experts who said his comments could do more harm than good.
Melanie Bien, director of mortgage brokers Savills Private Finance, said: “He doesn't need to say it. Why come out and effectively talk down the market? The reason nobody is buying is there is no confidence. Now you have a chief executive saying that. It doesn't help.”
Mr Varley admitted it had been “madness” for lenders to approve 100 per cent mortgages, and that it was time to apologise for the role of banks in the recession.
In an interview to be broadcast tonight on Sky News, he says: “Our view was that from the top to the bottom, you would see a fall of something like 25 to 30 per cent.
“I suspect we're about halfway through that at the moment, so in other words we've got another 10 to 15 per cent to fall between now and the end of next year.”
He said the level of mortgage borrowing in the past 10 years, in which customers were offered loans far greater than their incomes, had been a mistake.
He added: “The last 10 years will be seen as an anomaly rather than a normalcy. The loan-to-value ratios... were available at 100 or 115 or 125 per cent of the value of the house.”
Jonathan Cornell, of mortgage brokers Hamptons Mortgages, said today Mr Varley's comments could
“aggravate the situation”.
Mr Varley's bleak prediction also extended to the jobs market.
He said: “An additional 700,000 people unemployed over the course of the next 12 months is certainly possible to contemplate. It is possible unemployment will be worse in 2010 for a period than 2009.
“Our expectation is the UK economy will grow again in 2010. We've got to ensure that by behaving responsibly as a banking industry, we support that.”
He added: “If you look at the players who were involved in what's happened to the world... they would include central banks. The banks have to acknowledge that and to say sorry.”
Reader views (23)
How ridiculous for Mr Varley to be concerned by such matters. As a Barclays shareholder I have seen the share price fall from over £7 to £1.40 and believe that he, his executive board colleagues and their combined failed strategy should stay well out of the housing market.
Barclays is dominated by investment bankers, not good service orientated retail bankers (didn't Varley himself come from BZW, remember them?!?). It would seem that Varley, Seegars and Diamond Bob are well advised to stay out of this arena, although agreeing a guaranteed loan at 14% interest when the base rate is 2% would make me question their commerciality in any sphere of the banking world.
- David, London UK
The Bankers are really showing how stupid they are. What is the point of making such statements in times like this, even if it is possibly true. What is there to gain! Absolutely nothing! All this sort of talk just takes the whole economy deeper and deeper into the mire! I wonder how much of the mess that we seem to be in is due to statements like these,more than you care to think I would guess!
- Pedro, Dubai UAE
Remember, this same "Executive" is the one taking on a loan at 14%, which has to be paid back to the Arab backers. Surely this should illustrate a severe lack of banking judgement and common sense. 30% of Barclays is no longer in European hands (Thanks to this Exec).
On housing, there is no market. House prices are irrelevent, as without first time buyers the only price for houses is distressed prices. The banks now expect 25% deposit by first time buyers and looking at the average price of houses and the realistic salaries of first time buyers (Parents savings have been decimated and they can no longer take equity out of their own houses) then we have a 4 to 5 year wait until even the most prudent first time buyers can afford to buy a house.
By that time, hopefully the existing banks will have collapsed and been replaced by real community banks that know their customers, have some social responsibility and have realisrtic and sustainable expectations for profits.
- Stephen, Swindon
The Barclays' boss isn't talking 'down' the market. He's talking it 'up'. I've seen other projections of house prices dropping 30% in 2009.
- Phil Jones, London UK
I cannot understand how these bankers, having completely wrecked their businesses, are now once again behaving like well informed guru's. Personally I think they have zero credibility and the media would do well to stop recording their blather.
- Gordon Edge, Cambridge; UK
Only my heart goes out to the people who felt forced to buy at the peak of the market. I have no sympathy for the greedy buy to let investors although people still have to rent at ridiculous amounts. When rents drop and the mortgages can't be paid in full by it then I will have a really good laugh at the greedy piggies..
- Dc, London
He is not alone.
People in higher office are talking down sterling.
This is even worse.
- Bernard Parke, GUILDFORD
“The last 10 years will be seen as an anomaly rather than a normalcy. .........
Normalcy, is that like formalcy ?
Perhaps too much of his brain's on the other side of the Atlantic.
- Sid Holder, Brighton UK
The market is unlikely to be spooked by Mr Varley saying what the market already knows. Our economy is in a devastated state: the steady fall in sterling illustrates all too clearly what investors globally think of Brown and his pretentiously foolish "way out of the wilderness".
- James Elliott, Eastbourne UK
In the current climate he may be right.
However if the banks got their act together and started lending to first time buyers, at reasonable rates, then they market would stop falling.
There are lots of potential buyers out there, most would find it cheaper to take a mortgage and buy than rent, but they are frustrated by the lack of mortgages available.
- Simon, London
This man has been thoroughly incompetent and reckless in running Barclays, as witnessed by the ridiculous mortgages they were handing out. He obviously has no grasp of financial matters and is not in a position to make predictions. He should be sacked without compensation and pension benefits and should be made to repay his huge unearned bonuses instead of talking down the market which will leave more bad debts for his company to incur. I am a chartered accountant and, in my day, if anybody couldn't pass their accountancy exams they automatically went into banking because it was easier. Perhaps this man is one of them. Need I say more?
- Roger Slade, Winchester, Hampshire, England
I don't think you should criticise anyone for making a sober assessment which in any case is not much different to the view of many other commentators. You cannot base economic recovery on denial. On the contrary, a realistic statement by a banker should be regarded as positive for confidence in the banking system.
- Andrew, london, uk
So Melanie Bien thinks if everyone keeps quiet there may be suckers who'll support a collapsing market? How appalling.
- Bruce Robertson, Brighton, UK
This is nonsense. You can only talk a market up or down if it warrants it. The property market in the UK is hugely over priced and needs to fall considerably before it will level out. Melanie Bien is talking rubbish! She knows as well as Varley that the market NEEDS to drop considerably before things level out. All the experts and economists know the market will fall even further. You can only talk a market up when there's something to talk up. At the moment it's all on the way down, so let's be realistic and stop living in denial. The longer people put off bringing down the prices of their houses, the lower and harder the final fall will be. Property isn't moving at the moment because it's still highly overpriced. And for those who think it will pick up again soon....dream on and forget it! Have you any idea what has just happened in the world markets?
- Tom W, London
John Varley says ' 30% drop in BBC & here it is 15% drop'
Once again, shows that John cannot get his sums right? A cowboy runing Barclays would do a better job.
- Prashan Fernando, Colombo, Sri Lanka
Why is it that when estate agents, banks and surveyors talked "up" the market between 2000 and 2007, no-one spoke out to say that they were artificially inflating the market?
Now that someone is broadcasting an unpalatable truth, he is shot down in flames.
- Nobby Clark, Perth, Scotland
House prices were over-inflated anyway and if anyone was stupid enough to take on a huge mortgage they knew they would struggle with, more fool them. Property owners have made very large profits in the past on their homes, chickens and roost spring to mind!
- Sue, Orpington, Kent
I am surprised he says ONLY 15%. There are far worse fundamentals than anyone could have previously imagined. It is all unwinding fast, which means fast price drops.
- Dave Davies, Basingstoke
Hasn't this man and his ilk done enough to damage the housing market? I've had to put off retirement and work for another couple of years because I cannot sell my home and am still paying a mortgage, thanks to the banks miss-selling of endowment mortgages and Gordon Brown's destruction of my pension scheme. I'm tired of these so called "experts" pontificating - they don't have a clue what will happen with house prices. However, making "predictions" that the market will fall much lower stops people buying and is a self fulfilling prophesy.
- Janet, London, UK
Editor, have you quoted Mr Varley correctly? Did he really say he is sorry for the part played by governments and central banks in what has happened? How much humility does it take to acknowledge the failings of other people? Or does he think that Barclays is the central bank and government? Sounds like he is still a few crumbs short of a humble pie.
- Bloke, London
John Varley should take a long hard look at his Board and remove those that have been responsible for their losses. I wonder how many are actually qualified and over 40. Salesmen abound.
- Nigel, Epsom, England
is this one of the Chief Exec's who allowed his bank to make stupid loans in the 1st place? Why are we still listening to these cretins?
- Fly, london
"The loan to value ratios, as you know, were available at 100% or 115% or 125% of the value of the house." Surely, wasn't there an sensible economist or banker in any of the leading banks? Why were people like John Varley paid bonuses & fat salaries?
- Prashan Fernando, Colombo, Sri Lanka
