Planning blockages and rising costs are crippling the process but lenders' appetite remains strong, says broker
Labour’s pledge to deliver 1.5 million new homes is looking increasingly fragile as a wave of builder failures collides with higher borrowing costs and protracted planning delays.
Recent data show more than 1,500 construction firms have left the market in the past year, while around 1,900 more are in administration or being wound down. With developers squeezed by higher material and labour costs, brokers say the fallout is now filtering through to lending and affordability in the new-build sector.
Guy Nyirenda, of Altura Mortgage Finance, said lenders remain committed to supporting first-time buyers and the new-build market, “so the availability of mortgages will always be a priority.” Yet, he noted pricing has become “difficult within an uncertain market” as wholesale borrowing costs stay elevated and profitability margins narrow for both lenders and builders.
“The Government appears already to be far behind the run rate required to meet their new housing targets,” he said. “Huge innovation and support will be needed to get back on track.” Planning reform is seen as essential, but Nyirenda said approval delays mean the goal posts are constantly being moved, for developers and lenders.
He said: “Developers are finding the big delays with planning office and local authority blockages a huge barrier to delivering new housing. This is not only with the initial planning but also with getting the pre-commencement conditions signed off and satisfied to actually be able start the build.
“On a positive note, the lenders appetite to lend to developers remains strong and there is plenty of funding available. However, the delays from when the lenders originally approve funding to when projects are ready to start mean a whole new approval process, often with the new figures and timescales no longer meeting their lending parameters. “
While funding capacity remains robust, timing has become a critical pressure point. Delays between loan approval and project commencement mean some schemes must be re-assessed entirely, as cost inflation and revised schedules make earlier terms unworkable. The extended lead times have forced developers and lenders alike to revisit budgets and risk assumptions, introducing further uncertainty into an already cautious market.
Still, Nyirenda remains optimistic about lender appetite. “Lenders in the development finance space are still very keen to support house builders with a good track record on delivery,” he said. “However, they are becoming more focused on builders’ cashflow and ability to be able to ride the delays and increase in costs.”
Analysts say this combination of rising costs, financial caution and sluggish planning decisions could slow new housing output well into next year, potentially leaving Labour’s ambitious targets further out of reach. As demand continues to outstrip supply, affordability pressures are likely to persist - keeping the spotlight firmly on how policy, planning and finance interact in the months ahead.
