Bridging loan completions plunged by 28 per cent to £2.9 billion last year, as pandemic disruption took its toll on this form of short-term lending.

However, applications for bridging loans lifted by more than 11 per cent compared to the previous year, according to the Association of Short-Term Lenders. The value of applications also rose by 10 per cent to £25.8 billion.

There was a surge in third-quarter applications last year as the housing market revived following the introduction of the stamp duty holiday.

Bridging loan completions jumped 35 per cent in the fourth quarter of last year to £918 million.

Loan applications in the fourth quarter of last year hit £6.7 billion, down 12.7 per cent on the third quarter of 2020, but was 23 per cent higher on the same quarter in 2019.

Average loan-to-value ratios fell slightly in the fourth quarter and are currently below 59 per cent, the body pointed out.

The association added the value of loan defaults in the fourth quarter of last year jumped by 14 per cent, compared to the third quarter and was 23.8 per cent higher than the same period the previous year “as borrowers continued to feel the financial impact of the pandemic”.

ASTL chief executive Vic Jannels says: “The fourth quarter lending figures give us an opportunity to review the performance of 2020 as a whole. Completions were down on the previous year, which is to be expected given the periods of national lockdown.

However, applications were actually higher than in 2019, which reflects the enormous potential the bridging market has to provide customers with a funding solution through these difficult times.”

Jannels adds: “We must, however, remain cautious. The effects of economic slowdown are starting to be reflected by the value of loans in default and, while the roll out of the vaccine for Covid-19 continues at pace, a return to normal levels of economic activity seems unlikely before the summer, so these trends may persist for several months.”