Gross short-term lending by contributors to Bridging Trends data rose by 38% on an annual basis in 2021.

The 12 specialist finance packagers reported £626.7bn in lending last year, compared to £455m in 2020.

The average monthly interest rate dropped from 0.79% to 0.76% across the same time span, and the average LTV went up considerably, from 51% to 56.9%, which is a record high.

And there was a change in the mix of regulated and unregulated lending, too. In 2020, 49% was regulated and 51% unregulated. In 2021, this shifted to 40.8% regulated and 59.2% unregulated.

Meanwhile, just 14.8% of bridging loans were taken out on a second-charge basis in 2021, which is a record low.

Enness Global head of specialist lending Chris Whitney says this is “slightly surprising”. He adds: “However, we have lost some lenders in this sector, and no one really seems to have filled the gap. I think there is definitely room for some product and criteria innovation here.”

The most popular reason to taking out a bridging loan was for an investment purchase, at 25% (this was the most popular reason in 2020 as well, as 22%).

The second-most popular reason was for a chain break, at 18% (in 2020 this stood at 17% and also proved to be the second-most popular use for a bridging loan).

Data from Knowledge Bank shows that ‘maximum LTV’ was the biggest criteria search, followed by ‘regulated bridging’ and ‘minimum loan amount’.

“Although “maximum LTV” is reported as being the top-rated criteria search… it is noted that the average reported LTV of loans in the year sits comfortably below the 60% mark,” says MT Finance founding director Joshua Elash.

Impact Specialist Finance managing director Dale Jannels says: “The full effects of the stamp duty holiday appear loud and clear in this latest set of Bridging Trends data, and it feels like a watershed moment for the bridging finance market.

“With it still being a sellers’ market in many parts of the UK, I expect regulated bridging to continue to be popular throughout 2022 and this is being mirrored in our business currently.”

Elash adds: “While the year-end data for 2021 shows a positive and steady recovery in the demand for specialist lending following a challenging 2020, gross lending figures for the year remained significantly down on pre-pandemic 2019.

“As we move into 2022, we expect gross lending figures to fully recover and surpass the 2019 gross figures as more and more investors return to the market with a view to taking early advantage of the anticipated impact inflationary pressures will have on asset prices.”