Its Financial Stability Report revealed mortgage lending has seen profitability wane since 2009 as mortgage rates haven’t reflected rising wholesale costs.
But the Bank believes lenders may start to pass on their higher cost of funding next year.
The report said: "At the beginning of the financial crisis when funding costs rose sharply banks were relatively slow in updating the price of new mortgages and the residual remained negative for around a year.
"This suggests it may be during 2012 that any significant increase in banks' lending rates occurs."
Credit availability was reported to have risen slightly in 2011 Q3 particularly for high LTV mortgages but the Bank said some banks may already be raising mortgage rates.
The report added that banks have significantly reduced their reliance on wholesale markets and as such may adopt a wait and see approach before hiking mortgage rates significantly.
Further analysis showed the gap between customer loans and deposits has fallen £600bn since the credit crisis began.
The report added: "Market intelligence suggests retail funding costs are being bid up too, as banks attempt to attract more retail deposits and reduce their reliance on wholesale funding. This suggests pass-through will eventually occur."
