Written by the Lendus editorial team · Last updated: April 2026
Development finance rates in the UK currently range from approximately 0.65% to 1.20% per month (8–15% annualised), depending on project type, LTGDV, developer experience, and the lender. Residential development attracts the lowest rates; commercial and mixed-use development sits higher. Arrangement fees of 1–2% and exit fees of 0–1% add to the total cost.
Rates as of early 2026, with Bank of England base rate at 4.5%:
| Project Type | LTGDV | Rate Range (per month) | Annualised |
|---|---|---|---|
| Residential — experienced developer | Up to 65% | 0.65% – 0.85% | 8–10.5% |
| Residential — first-time developer | Up to 60% | 0.85% – 1.05% | 10.5–13% |
| Residential — complex or high-value | Up to 65% | 0.80% – 1.00% | 10–12% |
| Commercial-to-residential conversion | Up to 60% | 0.90% – 1.10% | 11–13.5% |
| Commercial development (new build) | Up to 55% | 0.95% – 1.20% | 12–15% |
| Mixed-use (residential + commercial) | Up to 60% | 0.85% – 1.10% | 10.5–13.5% |
| Mezzanine (all types) | 65–80% LTGDV | 1.20% – 1.80% | 15–22% |
These are indicative ranges. The actual rate depends on several variables explored below.
LTGDV — Loan to Gross Development Value — is the cornerstone metric in development lending. Lenders calculate it as:
LTGDV = (Land Loan + Construction Facility) ÷ GDV
Most senior development lenders cap at 65–70% LTGDV. Some specialist lenders go to 75% for strong schemes with experienced developers in high-demand locations.
Example project appraisal:
| Item | Amount |
|---|---|
| Land purchase | £600,000 |
| Build costs | £1,100,000 |
| Total development cost | £1,700,000 |
| GDV (10 units × £280,000) | £2,800,000 |
| LTGDV at 65% | £1,820,000 |
| Developer equity required | £380,000 (land deposit + cost overrun buffer) |
At 65% LTGDV the developer puts in approximately £380,000 equity for a £2,800,000 GDV project. Reduce LTGDV to 60% and the developer needs £680,000 equity — a significant difference in capital efficiency.
Mezzanine finance enables developers to push total leverage to 80–85% LTGDV, reducing the equity requirement substantially. But the cost is significant.
Example: Same project as above. Senior loan at 65% LTGDV = £1,820,000. Mezzanine at 15% LTGDV = £420,000. Developer equity: £60,000 (site costs only).
| Tranche | Amount | Rate | Monthly Cost |
|---|---|---|---|
| Senior | £1,820,000 | 0.80%/month | £14,560 |
| Mezzanine | £420,000 | 1.50%/month | £6,300 |
| Total | £2,240,000 | £20,860/month |
Over an 18-month build plus 3-month sales period (21 months total), rolled-up interest on both tranches would approximate £350,000–£400,000 — a substantial cost to model against the developer’s profit margin.
Mezzanine makes sense when the project return on equity improves despite the additional interest cost, or when the developer does not have the equity to proceed otherwise.
Lenders apply location risk assessments. London and the South East attract the widest lender appetite and best rates. Regional cities — Manchester, Birmingham, Leeds — are broadly acceptable. Rural, declining, or low-demand areas attract fewer lenders and higher rates.
Full planning permission granted before the loan starts is the baseline expectation. Pre-planning or outline planning only restricts the lender pool significantly and increases rates by 0.10–0.20% per month. Some specialist lenders will bridge pre-planning, but at bridge rates rather than development rates.
A fixed-price contract with a reputable contractor significantly improves lender confidence. Unknown or unvetted contractors — particularly on the first project — attract more scrutiny and may trigger a requirement for a monitoring surveyor with enhanced oversight.
Forward sales (where purchasers have exchanged contracts on units before completion) reduce lender risk and can improve pricing. A fully pre-sold scheme might achieve rates 0.10–0.15% below the standard range.
Build a track record. Every completed project builds your lender credibility. Even one successfully completed 3-unit scheme improves your rate for the next deal by 0.15–0.25% per month — worth tens of thousands over the facility.
Maximise GDV evidence. Have a RICS-qualified surveyor produce a formal development appraisal with comparable sales evidence before approaching lenders. Lenders apply their own GDV — if yours is supported by strong evidence, there is less room for a conservative downward adjustment.
Appoint a project monitoring surveyor early. Some lenders reduce rates where the developer proactively appoints a monitoring surveyor, as it reduces their risk exposure.
Use a specialist development finance broker. Development finance is not a commodity product. Lenders have specific appetites by project type, location, and developer experience. A broker who places development deals daily will identify the lender most likely to offer the best rate and terms for your specific scheme — and will negotiate on your behalf.
The difference between the best and worst rate in the market for the same scheme can be 0.30–0.50% per month — on a £2,000,000 facility over 18 months, that’s a £108,000–£180,000 difference in interest cost. Broker fees are a small fraction of that.
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