Market size and activity
- Estimated annual new lending: £15–20 billion in development finance across the UK
- Active lenders: 100–150 institutions lending on UK development projects
- Average deal size (SME): £1.5–3 million facility
- Typical loan term: 12–24 months
- New homes delivered by SME developers: approximately 40,000–50,000 per year
Pricing data (2026)
- Average senior rate: 9.5–11% per annum (rolled up)
- Clearing bank range: 7–10% pa
- Challenger bank range: 9–13% pa
- Specialist fund range: 10–15% pa
- Mezzanine range: 15–25% pa
- Average arrangement fee: 1.0% of facility
- Average exit fee: 0.75% of facility
Leverage statistics
- Average LTGDV (senior): 60–65%
- Maximum LTGDV (stretched senior): 70–75%
- Average LTC: 80–85%
- Typical borrower equity contribution: 15–25% of total costs
- Minimum profit on cost (lender requirement): 15–20%
Process and timeline statistics
- Average time to term sheet: 2–4 weeks from submission
- Average time to drawdown: 6–12 weeks from initial enquiry
- Application success rate: approximately 30–40% (varies significantly by lender and scheme quality)
- Average number of lenders approached per deal: 3–8
- Percentage of deals using broker: approximately 60–70%
Market trends (2026)
- Technology adoption: Increasing use of AI and automation for deal packaging, credit analysis, and lender matching. Platforms like Assesr are reducing the traditional 6–12 week packaging timeline to hours.
- Stretched senior growth: Growing lender appetite for stretched senior facilities (single tranche, higher leverage), reducing the need for separate mezzanine.
- ESG and sustainability: Emerging lender requirements for energy efficiency standards, with some offering preferential rates for developments meeting EPC A/B ratings.
- Build-to-rent: Increasing development finance activity supporting purpose-built rental schemes, with exit by refinance rather than unit sales.
- Regional rebalancing: More lending activity outside London and the South East, driven by regional house price growth and lower land costs improving viability.
- Regulatory scrutiny: Continued focus on building safety, fire regulations, and cladding remediation requirements affecting both new build and refurbishment projects.
Housing delivery context
The UK government targets 1.5 million new homes over the current parliament. SME developers — the primary users of development finance — are expected to deliver a significant share of this target. Access to efficient, well-priced development finance is therefore not just a commercial concern but a policy priority. Platforms that reduce friction in the lending process directly support housing delivery.