The lending environment has shifted
2023–2024 was characterised by caution: higher base rates, market uncertainty, and conservative lending criteria. 2026 is a different picture. Lender appetite has recovered meaningfully, driven by:
- Lower cost of capital: Base rate cuts reduce lenders' funding costs, making development finance more profitable to write.
- Deployment pressure: Lenders with committed capital need to deploy it. Sitting on undeployed capital is expensive, so they're actively seeking deals.
- Policy support: Government commitment to 1.5M homes gives lenders confidence that the residential development market will be supported.
- New entrants: Several new development finance lenders and funds have launched or expanded into the UK market, increasing competition.
What lenders are competing on
Rates
Rates have fallen 1–3% from 2023–2024 peaks. Prime deals that were priced at 10–12% are now achievable at 7–9%. Even higher-risk deals have seen meaningful reductions.
Leverage
Some lenders are stretching LTC to 85–90% for strong deals (up from 75–80% during the cautious period). LTGDV caps remain at 65–70% for most lenders, but a few are offering 70–75% for experienced developers with conservative schemes.
Speed
Lender response times have improved as they compete for deals. Through Assesr, average lender response time is 4.2 hours from credit paper submission. Some lenders are offering indicative terms within the same day.
Flexibility
More lenders are accommodating first-time developers, accepting permitted development schemes, and considering secondary locations that they would have declined 18 months ago. The risk appetite has broadened.
Deal types in highest demand
- Residential new-build (5–50 units): The bread-and-butter of development finance. Strong competition from multiple lenders.
- Commercial-to-residential conversions: Especially under Permitted Development (Class MA). Lower planning risk makes these attractive.
- Build-to-rent: Growing institutional interest in BTR is making lenders more comfortable funding developers targeting the rental market.
- Sustainable/green developments: Some lenders offer preferential terms (0.25–0.5% lower rates) for FHS-compliant or particularly energy-efficient schemes.
- Regional schemes: As London yields compress, lenders are increasingly active in Manchester, Birmingham, Leeds, Bristol, and other regional cities with strong fundamentals.
How to get the best terms
In a competitive lending market, the borrower with the best-prepared submission wins the best terms. A professional credit paper, realistic costings, and strong comparable evidence give lenders confidence to offer their most competitive pricing.
Submit on Assesr to access 50+ active lenders simultaneously. In a market where multiple lenders want your deal, running a competitive process across the whole market — rather than relying on one broker's 3–5 favourite lenders — is how you secure the best possible terms. Free to submit, 0.5% on drawdown.