Where we are
The first half of 2026 has been characterised by recovery and increasing confidence in the UK development finance market. Rates have fallen, lender appetite has grown, and the number of active deals in the market has increased. After the caution of 2023–2024, the market feels meaningfully different.
Interest rates: stabilising at lower levels
Development finance rates of 7–12% are now standard, down from 9–15% at peak. Further base rate cuts may deliver another 0.25–0.5% reduction, but the major adjustment has happened. Lender competition is now the primary driver of rate improvement — more lenders competing for the same deals pushes pricing down independently of the base rate.
Our advice: plan your deals at current rates. If rates fall further, it's a bonus that improves your margins. Don't build rate reductions into your appraisal as a base case.
Lender appetite: broadening
The number of active development finance lenders has increased, and their risk appetite has broadened. We're seeing competitive offers for deal types that struggled in 2023–2024: first-time developer schemes, secondary locations, higher leverage requests, and conversion projects.
In H2 2026, expect lenders to continue competing aggressively for good deals. The best terms go to developers who run competitive processes across the market — not those who rely on a single lender relationship.
Build costs: stable but elevated
Construction cost inflation has moderated to 3–5% annually. This is manageable, but costs are not falling back to pre-2021 levels. The risk in H2 2026 is that increased development activity (driven by planning reform and improved confidence) puts pressure on an already-tight construction labour market, potentially re-accelerating costs.
Mitigation: secure contractor quotes early, use fixed-price contracts where possible, and include adequate contingency (7.5–10%).
Land market: adjusting to new reality
Land prices are adjusting to reflect both higher build costs and planning reform. Grey belt releases are bringing new sites to market in areas where land wasn't previously available. Brownfield land prices remain firm in strong locations but are softening in areas where build costs have compressed margins.
The best opportunities in H2 2026 are sites where the vendor hasn't yet adjusted to new build costs — offering a margin that covers both construction inflation and regulatory compliance. Move quickly on these.
GDV: supported but location-dependent
House prices in most UK regions are stable or modestly growing. Strong demand, constrained supply, and mortgage market normalisation support values. However, growth is location-dependent — London and the South East are seeing slower growth than regional cities like Manchester, Birmingham, and Leeds.
Don't rely on future GDV growth in your appraisal. Use current achievable values, supported by recent completed sales (not asking prices).
Strategic advice for H2 2026
- Move now rather than wait: Conditions are favourable and may not improve significantly further. Developers who secure finance and sites now will be completing projects into 2027–2028, when housing demand will remain strong.
- Run competitive processes: With multiple lenders competing, the developers getting the best terms are those who approach the whole market. Assesr matches to 50+ lenders in 60 seconds.
- Stress-test everything: Include sensitivity analysis showing 10% cost overrun and 5% GDV reduction. If the deal still works, proceed with confidence.
- Look at grey belt: Early movers on grey belt opportunities will secure the best sites. These are just entering the market and competition will increase.
- Budget for regulation: FHS, BNG, fire safety, accessibility — include all current regulatory costs in your appraisal. Lenders are now checking for this.
Submit your deal
The financing environment in H2 2026 is the most competitive in years. Submit your deal on Assesr to see what's available — AI credit paper in 60 seconds, 50+ lender matches, average response in 4.2 hours. Free to submit, 0.5% on drawdown only.