The Association of Short-Term Lenders (ASTL) issued the warning as figures collected by the association showed bridging loan books increased by 19.7 per cent year-on-year, growing to £4.5bn in the 12 months to 31 December 2019.
Vic Jannels (pictured), CEO of the ASTL, said although the sector had been boosted by more people choosing bridging finance over longer term loans, the expansion of the market meant lenders should be cautious.
He added: “The value of loans in default has continued to rise, and there is some evidence that repossessions are also increasing, so it is important that lenders maintain responsible underwriting and collections practices alongside their appetite to continue to grow their lending.”
According to data, completions in Q4 2019 reached £1.068bn, a 13.7 per cent rise on Q3.
Meanwhile, average loan to values remained below 60 per cent.
However, applications in the final quarter of 2019 fell by 10.7 per cent on the record-breaking previous quarter. Despite this, applications increased 8.1 per cent compared to the same period the year before.
The number of loans written showed a quarterly growth of 13.7 per cent but year-on-year this was down 1.3 per cent.
The data compiled by the ASTL also found that the value of loans in default grew by 13.2 per cent on Q3 2019.