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, matched lenders are actively nudged until they respond — never left to sit — so deals don't go stale. 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.