Banks in the UK have 'significantly' increased the availability of secured credit to households in the three months to mid-December, according to the Bank of England (BoE) Credit Conditions Survey.

The report states that availability rose to its highest level since the survey began in 2007, driven in part by the Funding for Lending Scheme (FLS).

In its report, the BoE said: "In the three months to mid-December, lenders reported a significant increase in the amount of credit made available to the secured household and corporate sectors, and a slight increase in the availability of unsecured credit to households.

"Lenders expected a further increase in the availability of credit to all sectors over the coming quarter. Consistent with the sharp increase in credit availability, spreads on lending to the secured household and corporate sectors had tightened significantly, and were expected to tighten further next quarter, with the exception of lending to small businesses.

"Spreads on credit card lending to households had remained unchanged, while spreads on other unsecured lending had tightened significantly, and were expected to tighten slightly again next quarter. Consistent with the reported falls in spreads, demand had increased across all household lending, although corporate credit demand had been more subdued, with a reduction in demand for lending from small businesses."

The survey indicates that demand was generally expected to increase over the coming quarter, except in the cases of credit card loans and lending to large businesses.

The report also said that banks and building societies have upped their lending to those wanting to borrow but have smaller deposits.

However, Alan Clarke, Director of Fixed Income Strategy at Scotiabank, viewed the report with caution and warned that while there has been an improvement in credit conditions, he doesn't believe "that this is the stellar improvement that the language in the report hints at".

He said: "My knee-jerk reaction is that as much as I want the FLS to be a success - wording such as 'significant improvement in availability' just makes me think that the BoE is over-egging this. Clearly it is a move in the right direction. But at the end of the day this is a poll of lenders. Hence there is a risk of them talking their own book."

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