Lenders expect to extend more credit

By Christina Fincher and Avril Ormsby

LONDON (Reuters) - Lenders expect to make credit more easily available to households and businesses over the coming quarter but are not expecting much of a pick-up in demand, a survey by the Bank of England showed on Thursday.

The quarterly credit conditions survey showed government initiatives to boost lending had enjoyed some success -- secured credit to households increased in the second quarter for the first time since the third quarter of 2007.

But lenders expected spreads on new mortgage lending to remain wide, meaning borrowers would not see the full benefit of record low interest rates. And spreads on corporate lending were expected to widen further.

"While there are some encouraging signs in the credit conditions survey, the UK is certainly not out of the woods yet," said Colin Ellis, an economist at Daiwa.

"As long as credit scores continue to tighten, that will make it harder for households to get funding, which is likely to restrict activity, particularly in the housing market, for some time."

Britain's central bank slashed interest rates to a record low 0.5 percent in March and has been pumping cash into the economy by buying assets, mainly government bonds, with newly created money.

So far, the BoE has bought just over 100 billion pounds of assets under its quantitative easing programme, putting it on track to complete its 125 billion pound target by the end of the month.

QE QUESTIONS