Industry analysis by debt advisory specialists Sirius Property Finance reveals the cost of development finance has increased by just 0.1% since Q1.
This comes despite significant interest rate hikes to the Bank of England base rate.
Development finance usually takes the form of short-to-mid-term loans, providing finances with which to build property.
As such, the cost of development financing has a direct impact on the nation’s rate of development and house building.
The market snapshot shows that the basic cost of development finance has increased by just 0.1% on the quarter, with the average interest rate rising from 12.1% in Q1 to 12.2% in Q2.
An average set-up fee of 1.5% remains unchanged, as does the average exit fee at 1.1%.
The research shows lenders appear to be taking some additional caution by decreasing the maximum available loan by an average of £333,000 – it currently stands at just over £9.5m.
Senior debt – debt that takes priority over other unsecured or more “junior” debt owed by the issuer – is the most common, accounting for almost half (48.5%) of all development financing in Q2.
Stretched debt (26.5%) and mezzanine (10.3%) are the second and third most common types of loan.
Sirius Property Finance head of corporate partnerships Kimberley Gates says: “The cost of borrowing has exploded in recent months, so it’s good to see that despite two further increases to the base rate, the cost of financing a development has seen only the most marginal increase since the first quarter of this year.
“While the current domestic news cycle is taken up by the cost-of-living crisis, it’s important to remember that we remain in a time of housing crisis too.
“Therefore, it’s vital that ongoing housing development keeps moving forward during this difficult time in order to sustain the ongoing demand for homeownership.”
