This prompted specialist lender West One to speculate that total UK bridging finance could hit £1.5bn by year-end, up from roughly £1bn previously.

Bridging is the term used for the finance needed when a homeowner needs to complete on the purchase of a property before the sale of their existing home has gone through.

The pace of growth in the bridging industry picked up in Q3, to match longer term trends and reverse a slowdown seen in the second quarter of the year (Q2), according to the latest West One Bridging Index.

On the back of both larger loans and higher volumes, quarterly gross lending grew by 14% from £348m in Q2 to £399m in Q3. Lending in Q3 was 65% higher than the equivalent period in 2011.

On a 12 month basis, lending rose 12% from £1.26bn in the year up to June to £1.42bn in the year up to September.

In Q3, the bridging industry average loan size rose to £398,000 – up 8% from Q2, with loan volumes up 6% quarter on quarter.

Lucy Hodge, director at Vantage Finance, said:

“Our bridging business has picked up noticeably in the last year. This is due to greater demand for finance as well as trickier conditions in other credit markets. Traditionally, bridging was a good – if not regularly needed – option for clients who couldn’t get mortgages. After the financial crisis this scenario has started to crop up far more regularly. People are becoming more aware of the opportunities presented by bridging too, and more of our clients explicitly ask if it might be a good option for them.”

The average rate on a bridging loan fell to 1.31% in Q3 from 1.43% in Q2. This marks a return to a longer-term trend of falling rates that dates back to early 2009. The drop is a fall from Q3 last year when rates averaged 1.39%, and is also significantly lower than the average for 2011 of 1.42%.

Hodge said: “The sector has become incredibly competitive which has driven rates down to what I believe is the floor, or very near to it, to ensure that there is sufficient disparity between short term and mainstream lending. Inevitably the process has become more rigorous given the increase in general awareness of the sector and migration toward the mainstream lending world where liquidity in mainstream lending and project funding remains relatively poor.”