The number of mortgages approved in the U.K. during the first month of the second quarter was the least on nearly two decades of record, suggesting that the weak housing recovery could start to hit the country’s banks, according to The Daily Telegraph. On Thursday, the Bank of England reported that approvals for home purchases dropped by 2,000 in April from the previous month to 45,166, which reversed some improvements since a 20-month low was recorded in December. The figure represented the worst April on records dating back to 1993.
The level of loans is closely correlated with housing prices, and Nida Ali of Ernst & Young ITEM Club said, “A fall in mortgage approvals, from already depressed levels, certainly isn’t a good sign for the housing market.” Additionally, Morgan Stanley economists have predicted that property values will drop by 10% by the end of 2012, warning that the struggling housing market will start to negatively impact the profitability of the country’s leading banks in the next six months. However, the Council of Mortgage Lenders expects that mortgage lending will increase in 2011 for the first time in five years.