The bridging lender forecasted the bridging industry to hit £1.5bn by the end of 2012.
West One said it expected a surge in lending driven by residential property investors turning away from high street banks and building societies as their increasing funding costs affect their rates.
Gross lending in the first quarter of 2012 was £382m, 95% higher than in the first quarter of 2011, and 30% higher than the previous quarter. If the pace of growth continues along its current trajectory, gross lending in 2012 will hit £1.5bn, an increase of 68% from 2011.
Duncan Kreeger, chairman of West One Loans, explained: “A big funding gap has been created by the problems high street lenders are having with increasing funding costs, increasing capital requirements, and heavy exposure to toxic assets.
“As a result the high street simply can’t cater for the high demand from property investors for residential loans. It has created a huge gap between supply and demand that could become even wider if the economy fails to recover with any conviction.
“Net mortgage lending will only be around £5bn this year. The main market is still crippled and if the eurozone crisis worsens mortgage lending could enter a state of near-paralysis.”
Kreeger added that it wasn’t just investors who couldn’t get finance on the high street.
He said: “We’ve seen plenty of evidence of investors using bridging loans even when they can access a buy-to-let mortgage on the high street. This may be just the start of a more pronounced shift in the way property investors choose to fund their projects.
“The figures back up that view: with gross lending set to reach over £1.5bn by the end of this year, the bridging is growing at a rapid pace. Property investors see bridging loans as an increasingly legitimate option.”
Figures from West One also revealed that loan to values had begun to flatten out after increasing steadily since mid 2010. The average first charge LTV in Q1 2012 fell from 50.2% in Q4 2011 to 49.3%. Average first charge LTVs were still 2.3% higher than the average for 2011 of 47%.
Kreeger said: “LTVs have risen in line with increasing loan sizes as investors look to take on bigger, more ambitious projects that they can’t get funding for via high street banks.
“With the rental sector so vibrant at the moment, there is an increased appetite for larger residential projects so investors can maximize the returns they get from high rental yields.”
