Lenders expect to make credit more easily available to households and businesses in the first quarter of 2010, a survey by the Bank of England showed.

The Bank's quarterly credit conditions survey also showed that lenders expect to narrow spreads on both corporate and mortgage lending in the coming months.

"Credit availability was expected to improve further in the first quarter of 2010 for corporates and for secured lending to households and to stabilise for household unsecured credit," the survey said. "Spreads in general were expected to narrow over the next three months," it added. Spreads have widened dramatically over the past 18 months, reflecting a surge in borrowing costs for banks and a reluctance to lend to all but the safest of borrowers.

An improving outlook was cited as the main reason for the easing of credit conditions although lenders expected default rates on mortgage lending to continue to rise.

The survey noted that there has been some increase in maximum loan to value ratios for mortgages in the fourth quarter of 2009 and this was expected to continue into the new year, albeit at a slower pace.