Commercial Finance Specialists

Bridging loans have risen in both volume and value.

According to West One Loans' new Bridging Finance Index, gross lending is predicted to reach £806 million this year.

Gross lending in bridging loans rose 46% in the year to 31st August, with more commercial property investors looking to this type of short-term finance.

According to West One Loans, the expansion of the bridging loan industry is due to the retraction of high street lenders who have steadily withdrawn from mortgages since the onset of the credit crunch. Recent reports have also suggested than insurers and investments arms are looking to fill the gap left by traditional high street lenders.

The average bridging loan term was between seven and eight months in 2010, showing the volatility of figures for net lending. As if to exemplify this, one of the largest ever second charge bridging loans was completed last week.

Research also shows an increasing shift towards bridging loans for residential rather than commercial property development. The proportion of bridging loans granted to the residential sector has risen from 70% in 2009 to 82% so far in 2011.

Duncan Kreeger, CEO of West One, explained this development: "Residential property has a wider range of refinancing options than commercial property. The strong demand for accommodation means investors can be confident they can refinance easily when they are ready to rent."

"Commercial property is harder to value for bridging purposes and the market is relatively oversupplied at present, making rental voids more likely and therefore exit more difficult."

By Pete White