The latest Bridging Trends report has found that £626.7 million of bridging loans were transacted by Bridging Trends contributors in 2021, a 38% increase on the previous year.

The year saw consistent levels of lending from contributors across three of the quarters (Q1 £144.5m, Q2 £146.5m and Q4 £145.4m) with volume peaking in Q3 2021 to £190.24m. The report said there was a surge driven by the strong housing market activity as buyers attempted to take advantage of the stamp duty holiday before it ended.

Bridging Trends combines bridging loan completions from several specialist finance packagers operating within the UK bridging market.

Regulated bridging loans accounted for an average of 40.8% of all contributor transactions in 2021. With demand for regulated bridging highest in the first half of the year at 47.7% in Q1 and 41.6% in Q2, as homeowners rushed to complete before the end of the Stamp Duty Holiday Scheme at the end of June, before falling to 37.7% in Q3 and 36% in Q4.

Second charge bridging loans accounted for 15% of total contributor transactions in 2021, down from 23% in 2020. This is the lowest annual figure recorded for second charge bridging loans since Bridging Trends launched in 2015.

The average monthly interest rate in 2021 fell to 0.76% from 0.79% in 2020. While the average loan-to-value level hit a record high in 2021 at 56.9% – up from 50.7% in 2020, 52.9% in 2019, and 54.6% in 2018.

Funding an investment purchase was the most popular reason for borrowers taking out a bridging loan in 2021, accounting for 25% of all contributor completions, up from 22% in 2020.

Funding a chain-break was the second most popular use for bridging finance in 2021 at 18% of all lending, up from 17% in the previous year.

The average loan term in 2021 was 12 months, while the average completion time on a bridging loan increased to 52 days, up from 50 days in 2020.

Dale Jannels, managing director, Impact Specialist Finance, said: “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.

“With so much competition between lenders in the bridging finance space, the options now available to brokers and their customers is unrivalled which is pushing up LTVs and reducing rates, so it’s never been a better time to use such a facility either for investment refurbishment purposes or to fund chain breaks.”