Invest & Fund and Homes England roll out capped rate facility
Invest & Fund and Homes England are in the process of deploying their development finance capped rate facility.
In September 2020, the peer-to-peer property lender announced a seven-year partnership with Homes England to increase the amount of finance available to small- and medium-sized enterprise (SME) developers.
The partnership initially created a £25m revolving fund which would fund construction loans of between £400,000 and £2.5m, at up to 80 per cent loan-to-cost.
The partnership was extended with the launch of a new development finance capped rate facility in September 2022.
“Bringing confidence back to the market will be vital in the coming months,” said Invest & Fund in a blog post on the new product. “Even though housebuilding has now increased to pre-pandemic levels according to [National House Building Council] statistics, there are still significant challenges for homebuilders acquiring funds in a higher rate environment.
“Economists and experts now predict that the frequency and severity of rate increases may begin to wane. However, fewer and fewer funders will be willing or able to absorb those carried costs even if that was an initial strategy, and the increases will inevitably be passed on to clients and consumers.”
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The capped rate product will cap the rate at the point of drawdown, covering the borrower at a pre-agreed rate up to a percentage of the total future facility.
This allows Invest & Fund’s clients to plan with the knowledge that they will not be exposed to constant rate rises throughout 2023, regardless of central bank monetary policy, which the lender believes may become necessary to stabilise future inflationary pressures as macro events unfold.
The development finance capped rate will apply to facilities up to 70 per cent loan to gross development value at 6.65 per cent, plus Bank of England base rate.
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