Amy Baptiste, head of specialist finance at LDN Finance, said the past year had seen a “significant downturn, as developers faced limited equity availability and heightened market risk”.
She continued: “While this year appears marginally improved, conditions remain challenging for developers, and there are few indications that government intervention will meaningfully stimulate the market.
“That said, proposed planning reforms currently under review could significantly accelerate the application process, which would be a very positive development in the second half of the year.”
According to the Bridging & Development Lenders Association (BDLA), there are around 30 lenders that can offer ground-up development finance. This is out of a total of 57 lender members.
Billie Cox, associate at Sirius Property Finance, agreed, adding that enquiry levels have “steadily improved” over recent months as borrowers and lenders “gain more confidence around pricing, interest rates, and build costs”.
“We’re seeing more previously paused schemes coming back to market, particularly across regional residential and mixed-use developments, supported by improving exit confidence and stronger investor demand outside London.
“Longer term, the ongoing undersupply of housing, population growth, and focus on regeneration and regional investment should continue to drive strong demand for development, especially across regional cities and commuter hubs,” she said.
Daniel Bell, director and mortgage adviser at Bell Financial Solutions, said the “calls we are getting are more deliberate, more detailed, and almost always from developers who have been through the cycle before”.
He continued: “In and around Manchester, developers are still keen to build, but they are being far more selective about what stacks up. Schemes are smaller, assumptions are tighter, and conversations with lenders are starting much earlier in the process. First-time developers are finding it tough, not because there is no money, but because the bar has been raised.
“Lenders do have appetite, but it is targeted. They want realistic build costs, sensible timelines, and a strong understanding of local demand. Where those pieces are in place, funding can be achieved. Where numbers feel stretched, deals tend to stall quickly.”
Lender appetite ‘positive although still disciplined’
Baptiste said senior debt lenders “remain keen to deploy capital for the right opportunities”.
However, she said that mezzanine funders were “highly selective”, with only a limited number still demonstrating appetite to lend above 90% loan to cost (LTC).
“The challenges remain as slow sales rates continue to affect projects’ cash flows and viability and uncertainty over build costs continue to put financial pressures on deals.
“I think the key things we would like to see from lenders is clarity and consistency in underwriting criteria and the ability to remain somewhat flexible. With the market as it is, a clearer structure for higher leveraged projects would be helpful and a willingness from lenders to consider schemes with pre-letting or pre-sales risk,” she added.
Cox agreed that lender appetite is “positive, although still disciplined”, noting that there “good competition for well-structured schemes with experienced sponsors, sensible leverage, and strong exits”.
“Challenger banks, specialist lenders, and debt funds all remain active, meaning quality projects can attract multiple funding options.
“There is plenty of capital in the market, but lenders remain selective, with location, asset quality, and exit strategy continuing to play a major role in credit decisions. Increased competition is helping drive innovation and improve borrower experience, even though market saturation can sometimes make placement more complex,” she said.
Cox said lenders are already offering strong leverage, with up to 70-75% loan to gross development value (LTGDV) available on suitable schemes, so there is “limited scope to push this further without increasing risk”.
“The main challenges remain rising build costs, labour shortages, and land pricing. Encouragingly, lenders are becoming more flexible on exits and profit margins, particularly for long-term hold schemes such as houses of multiple occupation (HMOs), where rental income and long-term value are increasingly taken into account.
“Planning delays remain one of the biggest challenges. Further government support for first-time buyers would also help maintain momentum, as active first-time buyer demand keeps the housing chain moving, supports sales rates, and underpins confidence across the development sector,” she said.
Bell noted that one of the biggest pressures we see is “uncertainty” and developers can “invest significant time and cost only to find that assumptions shift late on, whether around exit values or leverage”.
“Clearer, upfront guidance and faster credit decisions would remove a lot of friction from the market.
“The next year will reward developers who stay disciplined and realistic, and brokers who can help shape deals that work within the tighter framework lenders are now applying,” Bell said.
