Development finance usually takes the form of short-to-mid-term loans, providing finances with which to build property.

This means that 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 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%. 

While it’s surprising to see such minimal change despite the wider UK economic backdrop, lenders do appear to be taking some additional caution by decreasing the maximum available loan by an average of £333,000.

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In terms of loan prominence senior debt is the most common, accounting for almost half (48.5%) of all development financing in Q2.

Kimberley Gates, head of corporate partnerships at Sirius Property Finance, commented: “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.

“It’s vital that ongoing housing development keeps moving forward during this difficult time in order to sustain the ongoing demand for homeownership.”