Falling swap rates are creating renewed refinancing opportunities for property developers as easing funding costs improve scheme viability and strengthen confidence across the specialist lending market.
Analysis by Octane Capital of average daily one- and five-year GBP interest rate swap rates shows a clear downward shift compared to both last year and the previous quarter.
So far this year, the average daily one-year swap rate has stood at 3.77%, while the five-year swap has averaged 3.94%.
Over the same period last year, the one-year rate averaged 4.44% and the five-year rate 4.29%, marking declines of 0.67 and 0.35 percentage points respectively.
COMPETITIVE PRICING
The trend is reinforced by more recent data. Over the last three months, the average daily one-year swap rate has fallen to 3.84%, down from 4.04% in the preceding three-month period. The five-year swap rate has eased from 4.02% to 3.92%.
Swap rates are a key component in the pricing of property finance, particularly when developers refinance completed schemes or transition from short-term development funding onto longer-term facilities.
As rates fall, lenders are typically able to price more competitively, improving affordability and widening refinancing options.
For developers nearing the end of a project, lower swap rates can make development exit finance more accessible, providing additional time to sell units in an orderly manner or refinance onto longer-term funding without resorting to discounted disposals.
ENCOURAGING SIGN
Jonathan Samuels, CEO of Octane Capital, says: “The reduction in average daily swap rates since the start of the year is a very encouraging sign and reflects the fact that the wider lending environment is continuing to stabilise.
“For developers, this has a direct impact on their ability to refinance completed schemes. Lower swap rates support more competitive exit finance pricing, which in turn gives developers greater flexibility and breathing space when it comes to repaying existing facilities and securing longer-term funding.”
IMPROVED CONDITIONS
And he adds: “After a challenging period where higher funding costs restricted refinancing options, we’re now seeing improving conditions that are helping to unlock projects and support delivery. Specialist finance plays a crucial role in that process, particularly when developers need speed, flexibility, and certainty to navigate the final stages of a scheme.
As confidence continues to return and funding costs ease, the outlook for development activity and refinancing is becoming far more constructive as we move further into 2026.”
