The Bank of England reiterated on Friday its mortgage swap plan has no upper limit and refused to forecast any final total after media said banks could exchange assets worth well above the estimate of initial demand.

The Financial Times, citing debt market sources, said banks may be preparing to swap between 80 and 90 billion pounds of hard-to-shift mortgage-backed assets for highly-tradable government debt to free up their balance sheets.

But the central bank repeated its estimate of an initial 50 billion pounds for the emergency scheme, launched last month to help bring an end to the credit crunch which has raised the spectre of a global economic slowdown.

"As we made clear initially, there is no arbitrary limit on the size of the scheme," a Bank spokesman told Reuters.

"We expect initial use to be around 50 billion pounds. We are not speculating on the size of the scheme - that will reflect its use over time."

The final amount swapped will be made public when the six-month window of opportunity closes in October. The scheme is understood to be progressing well, sources familiar with the situation said.

"The 90 billion pound estimate seems high, but extrapolating ... a 10 billion pounds per shop for the bigger UK players does get you to a gross figure in that ballpark," analysts at Royal Bank of Scotland said in a note to clients.

"This assumes that all banks will want to play."

Details of which banks are accessing the facility are confidential, but a British Bankers' Association spokesman said "it wouldn't be surprising" if banks were accessing more funds as there were still strains in the market.

However, the amount of funding the banks will be able to raise versus the securitisations pledged will be limited by the fairly steep premiums applied by the Bank of England - of up to 25 percent in the worst case.

Bank Governor Meryvn King has made it clear the scheme is not intended to get banks out of trouble for free after recklessly taking on too much risk, but it should help bring down interbank lending rates which have soared above official rates.

The spread between the interbank lending rate for 3-month sterling funds over secured lending rates eased somewhat on Friday in a sign that money market strains may be easing.

Separately, the British Bankers' Association said it had been discussing the way it fixes the standard for interbank lending with the U.S. Federal Reserve and other central banks as part of a review designed to restore confidence in the Libor gauge.

Interbank lending rates are under increasing scrutiny as to how trustworthy a market measure they are.