UK developers are increasingly reliant on specialist lenders as one in five face pressure from their banks over stalled schemes, rising costs and weaker market conditions, according to new research from Octane Capital. For landlords and investors, the findings highlight how mainstream lending hurdles are reshaping opportunities in the development and buy-to-let finance landscape.
Traditional lenders tighten the screws
Octane Capital’s survey of UK developers found 20% were experiencing pressure from their existing lender. Late-stage projects were most vulnerable, with nearly one in five developers saying their bank had applied stricter terms during the sales or completion phase. The main flashpoints were cost overruns (20%), project delays (17%), and tougher economic conditions such as high interest rates (17%).
Banks have responded by raising fees, delaying drawdowns, and in some cases selling loans on to third parties. Jonathan Samuels, CEO of Octane Capital, warned that this approach risks undermining delivery:
“Cost inflation, market uncertainty, and delays are part of the reality of development, but traditional lenders are often quick to apply pressure rather than work collaboratively. This can leave projects at risk of stalling or being sold off prematurely.”
Specialist finance stepping in
Faced with strained relationships, nearly a quarter of developers (23%) turned to alternative lenders over the past year. Specialist finance is increasingly seen as a lifeline, offering faster decision-making, flexible terms and a more partnership-led approach.
For landlords considering new-build acquisitions or portfolio expansion, this matters. Fewer mainstream-funded schemes could mean tighter housing supply, bolstering rental demand.
Nathan Emerson, chief executive of Propertymark, said:
“Current supply levels do not combat the fast pace of demand.”
That pressure on stock continues to support higher rents, underlining the importance of landlords securing flexible finance alongside strong rental opportunities.
Landlords face knock-on effects
Agents in several regions report that developers are being pushed to release units early. One Midlands letting agent told us:
“Developers under pressure from lenders are increasingly offloading stock at discounts, giving portfolio landlords rare buying opportunities.”
Industry observers caution that if traditional lenders remain risk-averse, buy-to-let investors may see fewer new developments coming through, just as tenant demand intensifies. For portfolio landlords, the ability to tap flexible finance could prove a decisive edge.
Editor’s view
The tension between banks and developers is another reminder of how fragile the housing supply chain can be. For landlords, the trend cuts both ways: fewer completions limit new rental stock, but distressed developers may create opportunities to secure discounts or partner with specialist lenders.
