Gross annual bridging lending decreased to £4bn in December as the market adjusted to the post-Brexit climate, figures from the West One Bridging Index suggest.
The third quarter of 2016 saw a drop in gross lending by 17% to £613.1m which was reflected in the decline of annualised gross lending for the total market, according to the Association of Short Term Lenders.
But the ASTL reported that the final quarter of 2016 demonstrated recovery with a 26% increase in lending from Q3.
Stephen Wasserman, managing director at West One Loans, said: “What’s imperative now is that the industry responds and makes diverse and flexible financing options available for property purchasers.
“The bridging sector in the UK has witnessed a 500% increase in activity over the last five years and we’re confident the sector is well poised to continue growing in the next year.”
These statistics come after HMRC’s property transaction data showed the number of non-residential property transactions increased by 2.8% between November and December 2016; a yearly increase of 6.2%.
The Council of Mortgage Lenders estimated gross lending for 2016 at £246bn and forecasts £248bn for 2017, with net lending expected to be £30bn this year and next.
Wasserman added: “With the upcoming changes in buy-to-let taxation the buy-to-let market has seen a significant swing to buying new properties through limited companies and special purpose vehicles.
“It’s clear that the buy-to-let market will be in a transition period in the year ahead but bridging’s agility will serve the sector well in fitting to changing needs as they emerge.”
Interest rates continued to fall throughout the second half of 2016 after a small rise in May as a result of the cut base rate to 0.25%.
Danny Waters, chief executive at Enra Group, West One’s parent company, added: “There is a need for financing options to be tailored, bespoke and cater for the individual borrower’s needs.
“We are seeing signs of the market quickly returning to growth, as people look for loans with the flexibility that only bridging and other specialist forms of finance can provide.”