According to quarterly publication Bridging Trends, developed by MT Finance, first charge bridging loan applications made up 90 per cent of market volume, up 12.2 percentage points from the prior quarter.
The report said this was partially motivated by investors and landlords seeking taking advantage of the stamp duty holiday.
The most common reason for using bridging loans was funding a purchase of an investment property, accounting for just under a quarter of contributor transactions, slightly up from Q1.
Traditional chain break was the second most popular use of bridging finance at 20 per cent of transactions, roughly in line with previous quarter.
Regulated refinance dropped to five per cent of contributor transactions, from 13 per cent in the prior quarter.
Regulated bridging loans fell in the second quarter, going from 47.7 per cent to 41.6 per cent.
The report noted that average monthly interest rates marginally increased in Q2 to 0.79 per cent, up from 0.74 per cent in the previous quarter.
Average bridging terms were 12 months with no quarterly change.
The average loan to value levels fell slightly from 55.2 per cent to 54.9 per cent, which the report said implied borrowers were not “overstretching themselves”.
The time taken to process a loan application also fell, with average completion times pegged at 47 days, down from 53 days in the first quarter. This was the lowest recorded timescale for completions since the second quarter of 2019.
Gareth Lewis, commercial director at MT Finance, said: “As purchases would have been at the top of people’s minds due to the stamp duty saving, it’s no surprise to see that first charge lending has significantly increased its share of transactional volumes.
“It will be interesting to see if this percentage decreases in the coming months as consumers look to raise finance out of existing properties to fund further property acquisitions or businesses.”
Enness’ head of specialist lending Chris Whitney added: “It looks like we have reached quite a stable platform over the last two quarters. Any previous pandemic worries seem to have been put to one side with the stamp duty holiday deadline creating a frenzy of activity. The higher level of investment purchases shows confidence in the UK property market is strong.
“I am slightly surprised that lending volumes weren’t higher. The market certainly felt very busy as we struggled to get valuers out in a timely manner due to volumes and many a solicitor was having to burn the midnight oil to keep up with demand.”
Brightstar Financial’s bridging and development finance specialist Stephen Watts said it was encouraging to see completion times had shortened since the last quarter as it suggested lenders were streamlining their processes to include remote valuations.
He added: “Some lenders are now offering AVMs up to 75 per cent loan to value (LTV) in some circumstances and with the ability for asset managers to benefit from modern technology and carry out virtual client meetings, more loan applications are benefitting from these time saving factors.”