Gross annual bridging lending increased by 45.8% to surpass £3.5bn in 2015, West One’s Bridging Index has claimed.
In 2014 the bridging industry lent £2.4bn and the 2013 figure was £2bn.
Despite the exceptional growth rate the market still makes up just 1.5% of the mainstream mortgage sector.
Duncan Kreeger, director of West One Loans, said: “We expect to pass the £4bn milestone in the not-too-distant future. Despite its growth, bridging remains a relatively alternative product, so there is still plenty of room for expansion, especially as new regulation drives future growth.
“Bridging is known for its speed, so it follows that short-term finance is easily outpacing the mainstream mortgage market. Bridging lenders are flourishing with an enhanced reputation for providing an excellent service.”
West One predicted bridging maintaining its growth rate in 2016.
It said the market has profited from the reluctance of high street mortgage lenders to lend commercially after the recession.
While commercial property prices have increased by 21% since their trough in 2013, bank lending to property firms is still only around £135bn – just over half its value in 2009 according to MSCI.
There was an upswing in properties sold at auction in 2015, with the value of properties sold rising by around £800m in two years.
West One was optimistic about the impact of the EU’s Mortgage Credit Directive, as it said the introduction of regulated bridging finance will enhance the industry’s reputation and invite more demand from FCA regulated brokers.
The size of the typical bridging loan rose to £984,000 in December, up from £747,000 six months ago – although West One doesn’t expect this trend to last.
Kreeger added: “The volume of loans actually decreased slightly in the final two months in the year due to a dip in demand for smaller loans. This inflated the average loan size, so we should see a correction at the start of 2016. The expected demand from smaller bridge-to-let borrowers could also reduce the typical loan size.
“But it’s still reassuring to know that even when the typical loan size approached £1m, lenders remained responsible, maintaining the average LTV first charge ratio.”