Lower Rates Have Not Restored Development

Because finance costs were only part of the problem.

The Bank of England’s Bank Rate is now 3.75%, down from 5.25% at its recent peak.

For developers, that is welcome. But lower rates have not unlocked development activity to the extent many expected. 

For two years, much of the market assumed lower rates would restore development viability. For many schemes, they have not — because finance costs were only one part of the problem.

Savills reports that, in the four years to February 2026, build costs rose by 17.5%, while house prices increased by just 4.5%. 

That leaves many schemes entering the funding conversation with less margin available to absorb risk. Planning delays, slower sales and longer delivery programmes erode that margin further.

The consequence is a more demanding funding structure. Lenders require more equity, more robust contingency and clearer evidence of the proposed exit because there is less headroom to absorb cost overruns, delay or weaker sales.

The practical response is not simply to wait for another rate cut. It is to identify what is constraining the scheme — margin, leverage, contingency, programme risk or the proposed exit — and structure the funding case around that reality.

A credible funding proposition must show where the downside sits and how it will be absorbed. That work needs to happen before lender outreach, not after the first round of declines.