The global credit market crisis has not affected the availability of home loans, mortgage lenders have said.

They also expect the amount of money they are prepared to lend in future will remain largely the same.

But they warned recent turbulence in the market, as well as changes in the cost and availability of funds indicates a drop in the credit supply.

Lenders also expect to use less "securitisation", under which lenders raise funds by selling bundles of mortgages to investors.

The warning in a Bank of England credit conditions survey increases expectations of a cut in interest rates before the end of the year.

The study, carried out between August 20 and September 13, found that buy-to-let investors have driven a small but unexpected rise in demand for mortgages.

Lenders predict the rise in demand for mortgages to continue among people with good credit records, but expect a fall in buy-to-let investments, and from those with less good credit histories and people who self-certify their income.

The number of mortgage defaults has also defied expectations by showing a slight decrease, while losses on each loan were also smaller than predicted.

However, it is thought the number of people defaulting on home loans in future will rise slightly.

The availability of unsecured credit to households also fell a small amount during the past three months, although there has been little change in the criteria lenders used to assess potential borrowers.

However, availability of unsecured debt is expected to fall, as lenders tighten the criteria they use for credit card and loan borrowing.

Howard Archer, chief UK and European economist at Global Insight, said: "This tightening of conditions increases the downside risks to business confidence, investment and employment over the coming months, and is likely to increase expectations that the Bank of England could trim its benchmark interest rate before the end of the year.

Copyright © PA Business 2007