UK mortgage approvals slump as Covid-19 hits housing market - as it happened

Rolling coverage of the latest economic and financial news

• Latest: Just 9,300 UK mortgages approved in May
• Mortgages approvals down 90% (!) since February
• Economists: Lenders and borrowers both nervous

Earlier:

• World stock markets have hit a two-week low
• Coronavirus - latest updates
• See all our coronavirus coverage

4.11pm BST

Time for a recap:

Britain's housing market remains gripped by the Covid-19 pandemic. New mortgage approvals fell to their lowest since at least 199, with just 9,300 new loans approved in May.

The global number of COVID-19 cases now tops 10 million, and 500'000 deaths, with a quarter of both being recorded in the US. The failure of the US to stop the numbers rising on the national level is weighing on stock markets.

Some US States are now reconsidering their re-opening plans. For a more lasting risk-on sentiment in markets, it is probably necessary that the US manages to ascertain some success in limiting the spread of the virus within its borders.

3.40pm BST

Those better-than-expected US home sales appear to be lifting the markets.

The Dow Jones industrial average is now up 331 points, or 1.3%, at 25,347 - as economic optimism trumps Covid-19 anxiety.

3.30pm BST

While the UK housing market lags, housing sales in the US have surged unexpectedly.

Contracts to buy US homes (excluding new builds) jumped at a record pace in May. The National Association of Realtors's Pending Home Sales Index, based on contracts signed last month, surged 44.3% to 99.6.

The Pending Home Sales Index (PHSI) climbed 44.3% to 99.6 in May from the revised April level of 69.0.

The PHSI is now lower by 5.1% from last year, per @NAR_Research.

Capture exposure to the U.S. Housing Sector through $HOMZ.https://t.co/zo5T4OOUGL pic.twitter.com/oXmXICDgo7

3.07pm BST

Here's our economics editor Larry Elliott on the slump in UK mortgage approvals since the pandemic struck:

The number of new home loans approved in Britain has fallen by 90% since the start of the Covid-19 pandemic to the lowest since at least the early 1990s, the Bank of England has said.

Threadneedle Street's monthly update on the state of the property market found that despite the reopening of estate agents from the middle of May, the number of mortgage approvals fell to 9,300 from 15,900 in April.

Related: UK home loans fall 90% since start of Covid-19 crisis

2.48pm BST

The US stock markets has opened for the new week, as investors try to assess the risk that rising Covid-19 cases derail the recovery.

The Dow Jones industrial average has jumped by 111 points, or 0.45%, to 25,127. But, that's largely due to Boeing - up over 4% after getting permission to start recertifying its 737 Max jet.

2.37pm BST

Bank of England policymaker Gertjan Vlieghe has predicted that the neutral level of interest rates - what you'd expect when an economy is at full strength and inflation is stable - has fallen during the pandemic.

Vlieghe also told a webinar today that this rate, called r-star, could keep falling -- implying borrowing costs will remain at or near record lows for some time.

If you're talking about the next 10 years, the evidence is stacked in the direction of we stay low and we might even go a little bit lower."

BOE VLIEGHE: THERE IS EVIDENCE IS POINTING TO THE R-STAR RATE STAYING LOW AND EVEN A BIT LOWER IN YEARS TO COME.

BOE VLIEGHE: WE'RE IN A RECESSION NOW.

2.11pm BST

Asset management firm BlackRock has given Europe a vote of confidence - hiking its rating on European shares, and downgrading their US rivals.

It argues that Europe should benefit from a cyclical upside' as its economy restarts, while American companies could suffer from an extended Covid-19 pandemic and rising trade tensions with China.

Blackrock downgrades US equities to neutral - lifts Europe to overweight.

1.26pm BST

With mortgage lenders getting more cautious, and many people worried about their jobs, 2020 could be a rough year for UK house prices.

The EY ITEM Club predicts that prices may fall nationally by around 5% in the next few months, and then only pick up by 2-3% in 2021.

12.47pm BST

In the City, investors seem to be shaking off their earlier anxiety about the jump in Covid-19 cases in the US.

The FTSE 100 index has reversed its earlier losses, and is now up 39 points or 0.6% at 6198.

Early indication of where we are headed today. Will it stick? #DOW 25202 +0.70%#SPX 3028 +0.49%#NASDAQ 9872 +0.16%#RUSSELL 1391 +1.17%#FANG 3971 -0.19%

12.28pm BST

Burger chain Byron knows all about flipping beef patties. But it's now poised to flip itself into administration.

Sky News is reporting that Byron, which employs 1,200 people, filed a notice of intention to appoint administrators on Monday.

Sources said Byron's board remained confident of sealing a deal in the coming weeks, with the likeliest outcome a pre-pack administration, which involves certain assets being sold to a new owner.

KPMG, the accountancy firm, has been running a sale process since early May.

Coronavirus: Burger chain Byron heads for pre-pack insolvency flip https://t.co/K5wtH3APWi

12.01pm BST

Energy news: BP has sold its petrochemicals business to Ineos - owned by Britain's richest man, Sir Jim Radcliffe.

The deal will raise $5bn (4.1bn) for BP, whose finances are under pressure following the slump in the oil price since the pandemic. Brent crude is trading at $41 per barrel today, from as much as $70 in January.

Related: BP sells petrochemical business to Ineos for $5bn

11.58am BST

Back in the aerospace industry, Boeing has been given the green light to start testing its 737 Max jet, which was grounded after two fatal crashes which killed 346 people.

Theses test flights could pave the way for commercial flights to restart -- Covid-19 permitting.....

Related: Boeing cleared for 737 Max test flights after grounding

11.44am BST

The Covid-19 crisis is threatening to create a two-tier mortgage market in the UK, warns Hina Bhudia, partner at mortgage broker Knight Frank Finance.

On the top tier - those whose jobs haven't been badly affected by the pandemic, and who have generous savings to fund a deposit. Below, people facing renewed uncertainty over their job prospects, with limited funds to get onto the housing ladder.

A two-tier mortgage market has emerged in recent weeks as lenders have become more averse to risk, and have largely withdrawn from higher loan-to-value lending ahead of the wind up of government support schemes this autumn.

This means the market remains particularly challenging for first-time-buyers, the self employed, or anybody that relies heavily on commission or bonuses to top up their income.

11.14am BST

Over in the eurozone, consumers and businesses are a little less gloomy about economic prospects - as lockdown measures are lifted.

The European Commission's economic sentiment indicator has risen from 67.5 in May to 75.7 in June. That's the highest level since the pandemic hammered the European economy in March, but still much lower than in February (just before lockdowns began).

European Commission report #Eurozone #economic sentiment up markedly in June to 3-month high. Index up to 75.7 from 67.5 in May & 64.8 in April (lowest since series began in Jan 1985). Still well below February level of 103.4. Consumer confidence up & all business sectors higher

June #eurozone data this morning show rather underwhelming recovery in #economic sentiment, but optimists will see the beginning of a 'V', especially in #employment expectations... pic.twitter.com/OvQEJu4JGQ

11.01am BST

Josie Dent, senior economist at the CEBR thinktank, says mortgage approvals are so low partly because lenders are cautious, and partly because potential borrowers suspect prices may fall.

On 13th May, housing market activity resumed, after a seven-week hiatus amid the worst of the coronavirus crisis. The pent-up demand built up during the period when moving home was banned at the height of the lockdown was reported to have led to a resurgence in activity following the lifting of certain restrictions. Rightmove data showed that on the first day of the housing market reopening, the number of home-movers visiting properties returned to pre-lockdown daily levels, and was up 4% on the same Wednesday in 2019.

However, transaction numbers are still kept low by tighter credit conditions. Mortgage providers have become far more cautious when lending and require larger deposits, thereby limiting the number of people who can buy a home. Many people are also likely to be put off from purchasing while house prices are expected to fall, preferring to wait and see if they can get a better deal.

10.27am BST

Ross Counsell, chartered surveyor and director at Good Move, says the slump in mortgage lending in May show a bleak output for the UK housing market"

Short/medium-term, mortgage lenders are going to start requiring larger deposits and move the parameters of their stress tests/affordability calculations - this combined with current job losses and income uncertainty will undoubtedly take many buyers out of the market.

Long-term we expect to see a boost in the property market across the UK alongside a lift in mortgage and re-mortgage approvals. However, it's important to note that this is thoroughly dependent on the government's continuing plans to support people's jobs and household income."

Covid-19 has had a devastating impact on the mortgage and property markets, so it is no surprise that lending was weak in May, with approvals for house purchase falling. With lockdown meaning that lenders were unable to send valuers out to physically view properties, the number of mortgages approved fell considerably. Lenders were kept busy processing mortgage payment deferrals and trying to get to grips with staff working from home rather than call centres, meaning it was far from business as usual'.

However, lenders remain keen to lend and awash with cash to do so. With the backlog of valuations clearing now that surveyors can once again carry out valuations, we expect mortgage approvals to pick up. Mortgage rates remain extremely competitive and lenders are slowly returning to higher loan-to-values, which is good news for first-time buyers in particular.'

10.16am BST

Households repaid more loans from banks than they took out in May, the Bank of England reports.

A 4.6 billion net repayment of consumer credit more than offset a small increase in mortgage borrowing last month.

While the absence of mortgage approvals for house purchase in May is not a surprise, there was no appetite from lenders in terms of remortgaging either. pic.twitter.com/eQC5k5ZR0o

The impact of mortgage payment holidays is pretty clear now. pic.twitter.com/kK3pSU1Tzf

10.09am BST

The UK property market has clearly not recovered from the effective ban on moving house announced three months ago.

In late March, the government instructed people to delay moving homes while the lockdown was in place. That restriction was eased on May 13, but today's data show that it has not unleashed a surge of pent-up demand for mortgages.

9.42am BST

Just in: The number of new mortgages approved in the UK has slumped again, as the Covid-19 pandemic continues to grip the economy.

The Bank of England has reported that the number of mortgage approvals for house purchase fell to just 9,300 in May, down from around 15,800 in April.

Mortgage Approvals in the United Kingdom decreased to 9.30k in May from 15.85k in April
They had been 73.7k in Feb! pic.twitter.com/fBjUcgn0pQ

Instant Info - Bank of England Mortgage Approvalshttps://t.co/ANviYhtRWF pic.twitter.com/GCYkFkPca1

Household's consumer credit borrowing remained lower than usual in May, as Covid-19 continued weighing on spending. On net, people repaid 4.6 billion of consumer credit in May following repayments of 7.4 billion in April and 3.8 billion in March....

The extremely weak net flows of consumer credit meant that the annual growth rate was -3.0%, the weakest since the series began in 1994.

9.29am BST

Global stock markets have dropped to their lowest levels in a fortnight this morning.

The losses in Asia overnight, following a late selloff in Wall Street on Friday, has pulled the MSCI world shares index to its lowest level since June 15, Reuters reports.

9.18am BST

After an hour's trading, European stock markets are dipping into the red.

The FTSE 100 index is now down 35 points, or 0.5%, at 6123 points. France's CAC has lost 0.44%.

Markets are in retreat as the focus remains firmly on the virus, rather than anything that is happening to the global economy.

It's the acceleration in infection in some US States that makes headlines and causes concern. That will keep fears of an even less V-shaped recovery...

9.11am BST

Online grocer Ocado has now dropped to the bottom of the FTSE 100 leaderboard, down 2.6% at 19.80.

This follows a report that Internet shoppers could be hit by a compulsory delivery charge as part of a campaign to cut congestion and toxic emissions.

The government is considering a range of measures to reduce the damaging impact of the e-commerce boom, which has led to a rise in delivery vans on British roads.

A report from the Department for Transport's scientific advisers recommended a mandatory charge", similar to that imposed for plastic bags, on all Amazon-style consumer deliveries.

9.02am BST

European aircraft maker Airbus has warned that the Covid019 pandemic will wipe out around 40% of its planned production levels.

CEO Guillaume Faury told Die Welt newspaper that production and deliveries will be 40% lower than originally planned in 2020 and 2021.

The crisis in the industry is huge - we have to react to it and adapt....

If there was a second wave of the coronavirus pandemic, with longer travel restrictions, the situation would be worse again. So I don't want to make any promises.

8.54am BST

This chart from Saxo Bank shows how the US stock market rally has fizzled out in recent sessions:

Today the #SaxoStrats look at the factors contributing to Friday's weak close for equity markets, including the Covid19 acceleration in the US and elsewhere: https://t.co/D2I8QKKHRY

All trading carries risk. pic.twitter.com/9d0hOhUNiu

8.48am BST

The re-imposition of restrictions in Texas, Florida and Arizona is the main talking point in the City this morning, alongside the sobering news that the official Covid-19 death toll has hit 500,000.

As Mohit Kumar of Jefferies told clients:

Covid-19 cases crossed the 10 million mark, with the number of fatalities crossing 500K. The number of cases in the US remains a concern, particularly in the Southern states where the rise in the number of cases is forcing some states to re-instate lockdown restrictions.

Market sentiment was subdued on Friday and into today's morning open as the market wakes to a continuing momentum in the number of virus cases.

These latest virus developments, in our view, can potentially slow the recovery, but are unlikely to derail it. With virus cases still rising in a number of US states, a more volatile trial-and-error approach to reopening now appears more likely, but we expect any new restrictions to be localized."

The market's attention has moved squarely to the US's second wave of COVID-19 infections. It was risk-off on Friday in global financial markets, as official data continued to show the COVID-19 caseload in several economically significant states is ramping up. The daily growth in cases across the US leapt to 1.7 per cent, with the virus curves in Texas, Florida, Arizona and California taking-on an exponential shape.

Perhaps of greatest concern to market participants, the new spike in infections has forced policymakers into action, with Texas and Florida announced a ban on drinking in bars on Friday.

8.23am BST

The London stock market has made a cautious start to the new week.

The FTSE 100 index of blue-chip shares has gained 7 points, or 0.1%, to 6167.

7.54am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Anxiety over Covid-19 is stalking the markets again, as the pandemic continues to grip the global economy and the human toll keeps mounting.

Overnight, global deaths from the virus hit 500,000 with 10m cases now confirmed worldwide. The US outbreak shows no sign of fading, either, with Covid-19 cases there currently rising by 40,000 per day:

U.S. #Covid Failure Is Getting Harder for Markets to Ignore - Bloomberg
*The larger economies tend to be more open than their counterparts.
*Link: https://t.co/cawvRYnW2q pic.twitter.com/3lJLP4fQ6I

Updates on Covid in the US:

- CA Gov Newsom orders 7 counties to close bars
- FL cases rise by 7.8% (3rd day straight)
- TX Gov Abbott says covid taken "very swift, dangerous" turn
- GA & AZ report record rises in new cases
- Total cases in US rise by 44,703; 508 new deaths

While Texas, Florida and Arizona remain among the most worrying in terms of new cases, other southern US states have either slowed down reopening plans or indicated intentions to do so. The positive test rate for Texas has now soared to a record 14.3%. Arkansas, just northeast of Texas, announced they will pause their phased reopening until the current wave subsides, while other neighboring states have indicated similar intentions if case counts continue to rise.

In terms of the effective transmission rates (Rt), 33 US states now have Rt values over 1.0. In fact only 2 states, Connecticut and Massachusetts, have their entire confidence level under 1.0 at this point, compared to 7 over 1.0.

Leicester could be first place in England to see local lockdown https://t.co/7aTdLQ10E1

Global mkts start the week on the back foot following heavy losses on Wall St on Fri as virus threatens econ reopening. Virus fatalities exceed half a million people worldwide. Bonds slightly lower w/US 10y at 0.65%. Oil prices down -2% w/Brent $40.19. Gold $1771. Bitcoin $9.1k. pic.twitter.com/iSehwFBKD9

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