What Are Typical UK Development Finance Rates and Fees?

Development finance pricing comes with more moving parts than almost any other type of property lending, an interest rate, an arrangement fee, a monitoring surveyor’s charges, valuation costs, and sometimes an exit fee too, all layered against a facility that releases money in stages rather than as a single lump sum. Understanding each piece separately makes the total cost considerably less mysterious.

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What’s the typical interest rate range?

For experienced developers on mainstream residential schemes, development finance interest rates typically sit somewhere between 6.5% and 9.5% per annum, with the most competitive pricing, around 6.5%-7.5%, available for schemes with lower Loan to GDV (below roughly 60%), a proven developer track record, and a strong location. Higher- leverage facilities, more complex schemes, or first-time developers can see rates stretch to 9%-13% or beyond.

Some lenders quote rates monthly rather than annually, in the same style as bridging finance, typically somewhere between 0.65% and 1.10% per month for mainstream schemes, working out to roughly the same 8%-13% annualised range.

Why is the range still this wide?

Because development finance pricing reflects a genuinely broad set of risk factors specific to each scheme:

• Loan to GDV. Lower leverage against the projected finished value earns more competitive pricing.
• Developer experience. A proven track record consistently accesses better terms than a first-time developer.
• Lender type. Bank-backed lenders tend to offer the lowest headline rates but apply stricter criteria, minimum experience, scheme size, sometimes pre-sales requirements. Non-bank and specialist lenders often price higher but bring more flexibility around first-time developers and complex schemes.
• Project type and location. Straightforward residential schemes in strong locations typically attract sharper pricing than complex or unusual developments.

Is interest paid monthly during the build?

Generally, no. Development finance interest is typically rolled up, meaning no monthly payments are required during construction, the interest accrues and is repaid alongside the loan itself once the project completes and the exit strategy, sale or refinance, plays out. This is a meaningful practical difference from a standard commercial mortgage, where repayments are usually required throughout the term.

What fees sit alongside the interest rate?

Arrangement fee

Commonly referred to as the “In” fee, typically 1%-2% of the gross facility, charged at the point the loan is set up. Many lenders allow this to be funded within the facility itself rather than requiring a separate upfront payment.

Exit fee

Sometimes called the “Out” fee, charged when the loan is repaid at completion. These have become somewhat less common as competition has returned to the development finance market, though they still apply with some lenders, worth checking specifically before committing.

Monitoring surveyor fees

Typically in the region of £750-£1,500 per visit, covering the independent inspections required before each staged drawdown is released. Larger or more complex schemes with more frequent visits will naturally see this cost add up further across the project.

Valuation fees

For a scheme with a Gross Development Value of around £3 million, valuation costs typically come in somewhere between £3,500 and £5,000, though this varies with the property type and complexity of the assessment.

Legal fees

Development finance legal work tends to be more involved than standard commercial conveyancing, reflecting the complexity of staged facilities, planning considerations, and build contracts, and typically costs more accordingly.

Are fixed-rate development finance products available?

Increasingly, yes. Where development finance was historically almost always variable-rate, priced as a margin over a reference rate, several lenders now offer fixed-rate options, letting developers lock in their cost of borrowing for the full build period. Fixed products typically carry a modest premium of around 0.25%-0.50% over an equivalent variable rate, but the certainty they provide over a build that might run a year or more can be well worth the additional cost for many developers.

What does “comparing on an all-in basis” actually mean?

Rather than comparing the headline interest rate alone, it’s worth calculating the effective total cost, interest, arrangement fee, and any exit fee, expressed as a genuine overall figure. Two lenders quoting similar interest rates can still produce meaningfully different total costs once arrangement and exit fees are factored in, which is why the headline coupon rate alone can be misleading when comparing offers.

The mistake developers often make

Some developers focus almost entirely on the headline interest rate when comparing lenders, without properly totalling arrangement fees, monitoring surveyor costs, and any exit fees across the likely project timeline. A lender with a slightly higher rate but lower fees, or no exit fee at all, can genuinely work out cheaper overall than one with an attractive headline rate but higher costs elsewhere in the structure.

The bottom line

UK development finance rates currently range from 6.5% to 9.5% per annum for mainstream schemes with experienced developers, stretching to 9%-13% or higher for complex or higher-leverage deals, with arrangement fees of 1%-2%, monitoring surveyor costs of £750-£1,500 per visit, and valuation and legal fees adding further to the total. Comparing genuinely on an all-in cost basis, not just the headline rate, is essential given how much the fee structure varies between lenders. Money Pilot’s experts csn provide all of this in detail, rates, fees, LTC and LTGDV mechanics, and how to compare offers on a genuine total cost basis rather than the headline number alone.