By Marcus Leach

The Bank of England has said that the Funding for Lending Scheme (FLS) will see a significant increase in the supply of mortgage funds.

A survey of lenders by the Bank reports that lending picked up in the last three months of 2012, and will continue to do so in the coming months.

The Credit Conditions Survey found that the Funding for Lending Scheme, launched at the start of August 2012, was now helping to increase the flow of money to borrowers.

The scheme's aim is to channel up to £60 billion of cheap money to lenders, based on the condition that they will lend to households and companies outside of the financial sector.

"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," the Bank said in their survey.

"The Funding for Lending Scheme was widely cited as contributing towards the increase in secured and corporate credit availability.

"Lenders expected a further increase in the availability of credit to all sectors over the coming quarter."

Darren Sharma, CEO of Frontline Analysts, said that the results of the survey show signs of promise.

"This latest credit conditions survey from the Bank of England is good news for the economy, as it demonstrates a continuation in the trend of increased credit availability," he said.

"While the Funding for Lending Scheme was widely cited by lenders as a reason for the increase in activity, what's undeniable is that small businesses are seeing less credit growth than bigger firms.

"Banks may be reaching out to bigger firms not only because of the cheaper money on offer but as a response to low yields on global assets.

"If this is the case, the growth in credit availability will be vulnerable to international yield rises.

"There are still countless potential scenarios in the global economy that could see banks circle the wagons once again and reduce credit availability.

"The Government will be very pleased with this data but the economy and financial sector remain fragile.

"Also, corporate borrowers are taking money for M&A and balance sheet restructuring, which don't grow the economy."

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