U.K. banks expect to increase the supply of mortgages in the first quarter as home prices gain and the outlook for economic growth improves, the Bank of England said last week.

A net 9.9% of respondents to the central bank's credit conditions survey said they expect the availability of secured credit to rise in the first quarter. A net 15.8% said mortgage lending picked up in the fourth quarter.

The figures add to evidence that the economy is recovering from its worst recession since World War II. Nationwide Building Society said last week that home prices rose 5.9% in 2009.

"The availability of secured credit to households had increased somewhat in the three months to early December, driven in part by improvements in the economic outlook and in prospects for house prices," the Bank of England said in a Dec. 31 report.

The bank also said default rates on secured loans fell unexpectedly in the fourth quarter, though more lenders are expecting an increase in the first quarter.

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