The report, which covers data from the major UK lenders, revealed that they believe arrears will remain steady as arrears rates in recent months were lower than they expected, partly because unemployment had not risen in line with their expectations.
Claims for possessions issued in the courts fell for the fifth successive quarter in Q4 2009 and properties taken into possession remained broadly flat.
The report also showed that gross and net mortgage lending fell in January due to a rush in activity from homebuyers who were bringing forward house purchases before the removal of Stamp Duty relief at the end of December 2009. There was an upturn in lending in February, which has alsos led to renewed optimism among the banks.
The BoE assessment of the latest trends in lending covers Santander, Barclays, HSBC, Lloyds Banking Group, Nationwide and Royal Bank of Scotland, who together accounted for 75% of UK mortgage lending at the end of 2009.
