Brighter economic outlook to boost lending to UK firms - Bank of England

The Bank of England is seen in the City of London August 7, 2013. The Bank of England broke with tradition on Wednesday, saying it planned to keep interest rates at a record low until unemployment falls to 7 percent or below, which it views as unlikely for another three years. REUTERS/Toby Melville

LONDON (Reuters) - British lenders expect a modest increase in lending to businesses in the fourth quarter, helped by improving economic prospects, a Bank of England survey showed on Wednesday.

The central bank's quarterly Credit Conditions Survey also found that banks and building societies planned the fastest growth in credit supply to small firms since the second quarter of 2010.

The Bank of England and many analysts have raised concerns over availability of loans for small businesses in the past few years, saying the lack of credit has been holding back Britain's recovery from prolonged stagnation.

Anxious to address the problem, the government and the central bank launched their Funding for Lending Scheme a year ago.

Under the programme, the Bank of England makes cheap funds available to banks and building societies on the condition they lend it on to households and firms.

The Bank of England poll also showed that lenders increased the supply of mortgage lending to households in the third quarter but did not expect the growth to continue at the same strong pace in the next few months.

Demand for secured loans is likely to get a boost from the government's flagship mortgage guarantee scheme launched on Tuesday.

The latest phase of the Help To Buy initiative allows homebuyers to put down a deposit of as little as 5 percent, helping those who have been unable to put together the high deposits lenders now require.

(Reporting by Olesya Dmitracova and Joshua Franklin)