SINCE the enforcement of new rules on mainstream mortgage lenders, the bridging industry has witnessed a rapid acceleration in its pace of growth, according to the latest West One Bridging Index.

Growth in annual gross lending now stands at 24%, over the 12 months ending July 1, 2014.

That compares with an 18% year-on-year expansion seen just two months ago, for the year ending May 1 - or just before new rules, introduced on April 26, started to significantly affect the mainstream mortgage market.

Since then bridging loans have rapidly supplied £470 million in gross lending, within the space of the last two months, ending July 1.

Due to that acceleration, industry gross bridging lending now stands at £2.17 billion a year, for the 12 months ending July - a record high. Moreover, if the latest rate of growth continues, the UK short-term secured lending industry could be worth £2.8 billion per annum by the end of 2014.

Duncan Kreeger, director of West One Loans, said: “Bridging is firing on all cylinder and this is down to a number of positive factors all coming into alignment over the past few months.

“Thanks to the constructive approach of the financial regulators, the new MMR affordability assessments don’t apply to most bridging loans. Due to the nature of short-term secured finance, the loan term is almost always less than a year and interest is often rolled up.

“By contrast, post-MMR delays in the mainstream market have crept into many areas of buy-to-let and commercial lending. So many property investors are now more actively choosing to bypass the usual lenders from the start, as the high street is forced to focus its attention on simpler cases.

“This is combining with a growing awareness about what bridging finance can get done, thanks in no small part to the growing expertise of specialist brokers. As the variety of borrowers grows in line with the sheer numbers of inquiries, we don’t expect this acceleration to reverse any time soon.”

The most recent spurt of growth in the bridging market is being driven by progress in both the size and number of loans being written.

The average loan size now averages £475,500 over the 12 months to July 1, a 14.8% improvement on the previous 12 months, when the average loan was for £414,000.

Greater loan volumes have been even more significant, with a 28.2% improvement over the last 12 months.

That is driven, in particular, by a 13.5% increase in loan volumes on a bimonthly basis - the two months from May 1 to July 1, compared to the two months before the Mortgage Market Review.

Mr Kreeger added: “Property prices are rising, creating both an opportunity for investors and a challenge for those in need of affordable homes or workplaces.

“Bridging lenders are responding with the finance that can help ease the squeeze on supply, in loan sizes that are more than keeping up with the property market and in volumes that will make a real difference.

“As wider economic conditions become more hospitable, the bridging market has already proved it can perform well in good climates as well as bad.”

Average loan to value ratios have increased to a 12-month average of 47.3%, up considerably from the low of 46.5% witnessed over the previous 12 months, ending July 1, 2013.

Mr Kreeger said: “It’s encouraging for the industry’s future growth prospects that even as volumes and loan sizes are both growing rapidly, loan-to-value ratios remain restrained.

“Lenders, with help from expert brokers, are lending only to credit-worthy borrowers and even after the current acceleration, among all the industry players there is a sense that lenders have even more capacity.

“But maintaining a note of caution is sensible and bridging lenders and borrowers alike will be able to keep making extraordinary progress without resorting to higher LTVs.”

Bridging interest rates have averaged 1.17%, over the year to July 1, 2014. That is down by 10 basis points from the previous 12-month period, when it stood at 1.27%.

Most recently, on a bi-monthly basis rates have fallen to just 1.14% over the two months ending July 1.

That compares to 1.19% over the two months to May 1 and is only three basis points above the record low of 1.11% set in the final two months of 2013.