Falling swap rates are improving refinancing prospects for developers planning exits in 2026, as easing funding costs strengthen scheme viability and rebuild confidence across the specialist lending market.
Jonathan Samuels, CEO of Octane Capital (pictured), said the downward movement in swap rates is creating a more supportive environment for developers seeking to refinance completed projects rather than rushing into discounted sales.
Octane Capital analysed average daily one-year and five-year GBP interest rate swap rates so far this year and compared them with the same period last year. It also reviewed movements over the past three months against the previous three-month period.
The data shows that so far this year, the average daily one-year swap rate has stood at 3.77%, while the five-year swap rate has averaged 3.94%.
These figures mark a clear shift from the same period last year, when the one-year swap rate averaged 4.44%, and the five-year rate averaged 4.29%. That represents declines of 0.67 and 0.35 percentage points, respectively.
The trend is also visible in shorter-term comparisons. Over the past three months, the average daily one-year swap rate has fallen to 3.84% from 4.04% in the previous three-month period. Over the same timeframe, the average daily five-year swap rate has eased from 4.02% to 3.92%.
Swap rates are a key factor in the cost of property finance, particularly when developers refinance completed schemes or move from short-term funding onto longer-term facilities. As rates fall, lenders can price loans more competitively, improving affordability and widening access to refinancing.
Octane Capital says this shift is especially relevant for developers nearing project completion, where development exit finance can provide time to sell units in a more structured way or refinance onto longer-term funding without pressure to accept reduced prices.
How swap rate changes are shaping refinancing
Octane Capital points to several practical effects of falling swap rates:
More competitive pricing for development exit and long-term refinance loans
Greater flexibility for developers repaying existing facilities
Reduced pressure to sell completed units at discounted values
Improved confidence across the specialist lending market
The lender says these conditions are helping to restore momentum for projects that were previously constrained by higher funding costs.
“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,” said Samuels.
“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.
“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.”
