The Intermediary –- May 2026 - Flipbook - Page 70
SPECIALIST FINANCE
Opinion
Great potential and
customer loyalty
T
here has been a lot
wrien since January
about how activity
levels at the BDLA
have been increasing,
with more and more
enquiries coming into the sector.
During May, we announced a number
of new members, some of a very
substantial nature, and details of
our headline sponsor at the Annual
Conference will emerge very soon.
Of course, until recently, we
did have a seled interest rate
environment and, only a few months
ago, with lower inflation, the Bank
of England was thought to have the
confidence to lower interest rates as
we moved into the laer parts of 2026.
However, with current world events
still unresolved, it remains to be seen
how this period of uncertainty is
going to affect property investors and
property developers.
We must not forget that the BDLA
also covers development finance and
perhaps we don’t write oen enough
about ground-up development. But
we cannot escape the fact that we
have an unending housing crisis and
new-build homes, in new locations,
are vitally important for the future of
our country.
In regular discussions over
the years, I have wrien about
the diversification of financial
intermediaries – in particular from
the mainstream sectors moving into
other areas of funding, including
commercial finance.
However, not many go as far as
development finance, for reasons
including complexity and transaction
times. There are no quick wins in
finding finance for new-build projects,
but there can be good rewards and a lot
of customer loyalty.
Recent reports by specialist
development finance lenders indicate
they have had renewed activity in the
sector. Enquiries and funding have
increased significantly - but there
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The Intermediary | May 2026
are also many caveats, not helped
by the disparity in recent reports on
house prices, property availability and
mortgage rates. So where do we begin
to assess the outlook for this market?
ADAM TYLER
is CEO of the Bridging &
Development Lenders
Association (BDLA)
A matter of timing
The best place to start is, of course,
with the simplest point: timing. If
you are looking for development
finance now for a ground-up
project, the chances are that you
will not be looking to put a spade in
the ground until late 2026 or even
2027. If you consider the time of
the loan transaction, the finalising
of planning, the appointment of a
contractor and trades, then you can
understand why a six-month window
is still ambitious. Interest and,
indeed, actual growth and demand in
development finance is an investment
now for the future.
This one reason alone can put
off some intermediaries looking to
work in this sector. Who wants to
wait up to a year for a transaction to
complete, with the inherent risk that
you may not get paid, when you can
transact other funding opportunities
in a week?
There are, however, plenty of
intermediaries who understand
the benefits, and a pipeline of
development projects is the key,
as generally the loan sizes are
much larger.
As mentioned, there are complex
market issues currently, driven by a
still uncertain environment, and we
all wait for confirmation that we still
have interest rate stability. During this
recent period, we have seen mortgage
rates increase and, at the same time,
as there is a glut of properties on the
market, property prices have been
stagnating in certain areas.
What does all this mean for
development finance, where the Gross
Development Value (GDV) is one of
the key components in calculating
the amount that can be borrowed by a
developer? While there are other
factors considered in funding a
ground-up project, it is this figure that
determines the maximum amount,
generally set at 60% of the GDV, based
on the value of the land acquisition
and the construction costs.
Alongside this, the current and
future state of the housing market,
alongside the forecast for the UK
economy, are major factors in
the underwriting decision. An
indication of a more buoyant market
in development finance would
reflect well for the future of the
economy, now and for the rest of this
Government.
If a broker is considering
diversification or further expansion
of their current remit in arranging
finance, then sourcing development
finance, whilst not necessarily
underserved, is a great option to
consider. There may be challenges
currently, but it’s a sector brimming
with potential and, with good
customer loyalty, can deliver a strong
pipeline of business, particularly in
more benign market conditions.
There are also a number of
specialised lenders able to offer
assistance to intermediaries about how
to assess and present a project in the
right way. If development finance is an
area you are considering, take a look
at the BDLA site to find our members
active in this area. They will be willing
partners to walk you through your
first foray into helping a developer get
the funding they need for their next
project. This could help benefit your
business, the economy and contribute
towards solving the housing crisis. ●
