FRANKFURT, August 8, 2008 (AFP) - The tight squeeze on lending to home buyers and businesses followed the US subprime crisis have eased slightly in the last three months, the European Central Bank said on Friday.

But demand for lending has fallen, and banks are chary of lending for household expenditure, the survey found.

The ECB's July survey of more than 100 eurozone banks found 'somewhat lower net tightening of credit standards' for businesses and for home purchases than in the first quarter of the year, it said.

This was a reference to a period over the New Year into the first quarter when banks were reluctant to lend to each other and central banks injected short-term funding into the banking system.

But demand for credit had also weakened in the second quarter because of a fall in the number of corporate takeovers, slumping housing markets and falling consumer confidence, the ECB said.

Meanwhile, conditions for loans for consumer credit and other household purchases had tightened slightly because banks expected economic conditions to deteriorate in coming months, the ECB said.

In terms of demand, banks reported a fall by both businesses and households.

Demand by business had fallen because of a reduction in mergers and acquisitions, less corporate restructuring and a trend towards internal financing.

Households, meanwhile, were seeking fewer loans because housing markets were under pressure and also as a result of 'deteriorating consumer confidence.'

As in previous surveys, commercial banks reported that lending to companies was more affected by financial market turmoil than lending to households.

The ECB questions senior loan officers at 112 representative banks to get a feel for commercial lending conditions every four months.

It said that 'banks reported that their access to money markets and debt securities markets was somewhat less hampered by the effects of the financial market turmoil in the second quarter of 2008 compared with the first quarter.'

The ECB has been supplying money markets with ample amounts of cash to ensure a continued flow of credit on which business depends.