How do lenders price development finance? Four inputs, three fees, and interest on what is drawn.
Development finance is priced from about 8% a year in 2026 at moderate leverage, rising to 11% to 13% at the top of the range, and the rate is charged on the drawn balance as it builds, not on the facility. Lenders set it on four inputs: leverage against cost and GDV, the developer's track record, the scheme itself, and how it is repaid. Then come three fees: arrangement at 1% to 2%, exit at 1% to 2% of the facility or GDV, and monitoring surveyor fees through the build.
By Dominic Whitecross, Co-Founder, HyLend. Last reviewed October 2026.
Indicative pricing by leverage, 2026
| Leverage | Rate per year | Arrangement | Exit | Who lends |
|---|---|---|---|---|
| Up to 55% LTGDV, 75% LTC | 8% to 9% | 1% to 1.5% | 1% | Banks and senior funds, experienced developers |
| 55% to 65% LTGDV, 85% LTC | 9% to 10.5% | 1.5% to 2% | 1% to 1.5% | Specialist lenders, the mainstream |
| 65% to 70% LTGDV, 90% LTC | 10.5% to 13% | 2% | 1.5% to 2% | Stretch senior; monitoring heavier |
| Above 70% LTGDV | Senior plus mezzanine from 1.35% a month | 2% plus mezz fee | 2% plus profit share | Mezzanine layered behind senior |
Rates by loan to GDV with worked interest figures are on the development finance rates page, refreshed monthly.
The four inputs
Leverage. The main driver. Each step up in loan to GDV costs roughly 0.75% to 1% a year, because the lender's loss on a failed scheme grows faster than its margin.
Track record. A developer with three completed schemes of similar size pays at the bottom of each band; a first scheme pays at the top or needs a mezzanine or equity partner. Lenders read experience as the single best predictor of the build finishing on budget.
The scheme. Houses price lower than flats; single phase lower than multi phase; standard construction lower than modular or listed; strong local demand evidence lower than a thin market. Location affects the GDV the valuer accepts more than the rate itself.
The exit. Sales with a marketing agent instructed and a realistic absorption rate, or a term lender's indicative terms for a retained scheme, make the difference between a 9% and a 10% case. An exit the lender has to take on trust is priced. Exit finance options →
Why the facility rate is not the bill
Interest accrues on money drawn. A £2.5m facility is drawn in stages over 14 months; the average balance might be £1.3m, so the interest bill at 10% is nearer £150,000 than the £250,000 a rate times facility calculation gives. Interest is usually rolled up, so the balance including interest must stay inside the facility until sales arrive; that peak balance is the number lenders and the cash flow template test. Model the drawn balance month by month →
The fees lenders do not lead with
Monitoring surveyor: £1,500 to £3,000 for the initial report, then £750 to £1,500 per visit, monthly through the build. Lender's legal fees: £5,000 to £15,000 and up depending on titles and the number of plots. Valuation: £3,000 to £10,000 for the residual and GDV report. Non utilisation fees on some bank facilities if the money is drawn slowly. Extension fees of 0.5% to 1% if the term is exceeded, plus a higher rate. Added together they are 3% to 5% of the facility on a typical scheme, which matters when comparing a 9.5% offer with 2% fees against a 10% offer with 1.5%.
How we place it
We price each scheme against the lenders whose appetite matches its leverage, size and asset type, and compare the total cost over the programme, drawn balance interest plus every fee, rather than the headline rate. On most schemes the cheapest headline is not the cheapest facility.
Send the basics
Asset, amount, timeline and exit. Lender backed indicative terms within 24 hours, tested across the whole market rather than a single panel.
Send the basics → or call 07310 008347, or WhatsApp +44 7741 434395.
Development finance pricing: FAQs
What are typical development finance rates in the UK in 2026?
From about 8% a year at up to 55% loan to GDV for experienced developers, 9% to 10.5% in the 55% to 65% band where most schemes sit, and 10.5% to 13% for stretch senior up to 70%. Mezzanine behind senior is priced from 1.35% a month.
Is development finance interest charged on the whole facility?
No. Interest accrues on the drawn balance as funds are released, usually rolled up into the loan. The real bill on a staged draw is well below rate times facility.
What fees come with development finance?
Arrangement fee 1% to 2%, exit fee 1% to 2% of the facility or GDV, monitoring surveyor fees per visit, lender's legals and valuation, and extension fees if the term overruns. Typically 3% to 5% of the facility in total.
What is loan to GDV?
The facility as a percentage of the completed scheme's gross development value. Lenders cap at 65% to 70% and apply a second cap of 85% to 90% of cost; the lower result is the loan.
Does a first time developer pay more?
Yes, usually at the top of the band for the leverage, or with lower leverage, or with a requirement for an experienced contractor or project manager. Track record is the strongest single pricing input after leverage.