The research suggests lending in 2011 was 110% higher than 2010 and in December was more than two and a half times higher year-on-year.
The volume of loans advanced was 62% higher last year than in 2010 thanks to an increase in the number of property investors using bridging loans to finance their projects.
Net lending increased 67% in the same period.
The rapid rate of growth keeps the industry on course to meet West One’s projection for gross lending to break the £1bn mark by 2013.
Loan size
The average loan size was 28% higher in 2011 than 2010, indicating investors are taking on yet bigger projects.
However, the average size of a loan fell from £322,000 in August to £266,000 in December, reflecting the traditional winter slow-down.
Duncan Kreeger, chairman of West One Loans, said: “Buy-to-let is the horse pulling the cart and it’s driving the bridging industry forward at a rate of knots.
“The first-time buyer mortgage famine means a feast for property investors. Rents are high, property prices are deflated, and that has created a vibrant rental market that investors are piling into.”
Despite banks increasing the number of buy-to-let mortgages, they have been unable to keep pace with the proliferation in demand, Kreeger claimed.
Buy-to-let lending is still very low by historic standards with 124,000 buy-to-let loans made last year, compared to 346,000 in 2007.
Analysis from West One Loans reveals the market has shifted markedly towards residential finance and away from commercial lending.
In 2011 some 84% of all loans by volume were to residential property investors, compared to just 70% in 2009 and 77% in 2010.
Kreeger explained: “Residential property is much easier to refinance than its commercial counterpart.
“It gives investors a clear and easy exit strategy because the astronomical demand for rented property means they can be confident of refinancing easily once the property is ready to rent.
“In comparison the commercial market is saturated due a chronic oversupply. This makes rental voids a real concern, and can leave investors stranded with no easy avenue of escape.”
LTV and rates
LTVs have risen steadily since the beginning of 2010, reflecting the increasingly large loans sought by borrowers, and the strong credit performance of loan portfolios.
In 2011 the average first charge LTV was 47%, up from 44% in 2010.
Broken down by quarter LTVs were at their highest in Q4 2011 when they reached a high of 50%.
The average interest rate on a bridging loan declined year-on-year to 1.41% by the end of 2011, down from 1.64% a year ago.
