Banks and building societies have reported the strongest pick-up in the availability of mortgages seen in two years.

A Bank of England survey found that an overall balance of 15.5% of lenders had increased the availability of mortgage credit to households in the third quarter of 2015 - marking the strongest reading seen since autumn 2013.

Lenders also reported that mortgage availability to borrowers with deposits of less than 25% increased for the second quarter in a row.

The Bank's Credit Conditions Survey also found that demand for mortgages increased across all types of lending, with a particularly significant increase seen in demand for buy-to-let lending. Overall demand is expected to be unchanged in the final quarter of the year.

In signs that cheap mortgage deals will continue to be available in the coming months, mortgage lenders reported that their profit margins had narrowed significantly in the third quarter and were expected to narrow again slightly over the next three months.

By contrast, the availability of credit to companies was reported to be unchanged in the third quarter, and this was expected to remain the case in the fourth quarter.

Ed Stansfield, c hief property economist at Capital Economics, said the "weak" availability of credit to the commercial sector suggests that lenders are increasingly focused on lending to the residential mortgage market.

He said: "A growing desire to increase market share suggests that competitive pressures across the mortgage market are rising."

The Bank conducts its quarterly Credit Conditions Survey as part of its role to maintain financial stability.