The winter of 2025/26 has exposed a growing disconnect in the prime development market: projects have completed broadly on schedule, but sales velocity has not followed the assumptions embedded in original appraisals. In early 2026, this is creating pressure at precisely the wrong point in the capital stack, when development facilities are maturing and senior lenders expect repayment or refinance.

This is unfolding against a stable but restrictive monetary backdrop. Following the Bank of England’s decision to hold the base rate in February 2026, lenders have accepted that borrowing costs will remain elevated for longer than initially anticipated. While this has not halted prime demand, it has slowed decision-making, lengthened marketing periods, and reduced the pace of completions, particularly at the upper end of the market.

At Willow Private Finance, we are increasingly engaged where developments are fundamentally sound, well-located, well-designed, and correctly priced, but exit assumptions around absorption rates have proved optimistic.

This article examines the “sales velocity trap” in 2026, how lenders are responding when exits stall, and what structured solutions developers are using to preserve value without eroding all remaining margin.

Market Context In 2026

Prime residential development in 2026 is characterised less by a lack of demand and more by hesitation. Buyers remain active, but decision cycles are longer, chains are more complex, and discretionary purchases are taking more time to complete. This has materially altered absorption profiles across many schemes delivered in late 2025 and early 2026.

From a lending perspective, development finance was underwritten on the assumption that sales would accelerate post-practical completion. In reality, lenders are now seeing partial disposals rather than clean exits, with a tail of unsold units extending beyond loan maturity dates.

UK Finance commentary released at the end of 2025 highlighted increasing attention on development exit risk, particularly in prime and super-prime locations where unit pricing is less elastic. Lenders are responding by tightening exit assumptions on new deals, but legacy facilities remain exposed.

Crucially, this is not a credit crisis. It is a timing and liquidity problem. Projects are viable, but capital structures were not designed for slower absorption in a higher-for-longer rate environment.

How Development Exit Finance Works In Practice

Development exit finance sits between short-term bridging and long-term investment lending. Its purpose is to refinance a maturing development facility once construction risk has been removed, but before full sales completion.

In 2026, exit facilities are typically underwritten on a stabilised, partially sold scheme, with remaining units treated as investment stock rather than speculative development. This shift materially changes how lenders assess risk.

Income assumptions may be introduced where units are let temporarily, or conservative disposal timelines applied where sales are ongoing. Loan-to-value metrics are based on revised GDV or investment value rather than peak appraisal assumptions.

Exit finance is not designed to maximise leverage. It is designed to buy time, preserve control, and avoid forced sales at suboptimal pricing.

What Lenders Are Looking For In 2026

Exit lenders in 2026 are focused on realism rather than optimism. They want clear evidence that the scheme is complete, compliant, and marketable, with no residual construction or planning risk.

Sales evidence is critical. Completed exchanges, progressed reservations, and credible buyer pipelines materially improve lender confidence. Purely aspirational pricing with no transactional support is heavily discounted.

Where units are unsold, lenders want to understand alternative strategies. This may include short-term lettings, bulk disposals, or phased pricing adjustments. Flexibility is viewed positively; rigidity is not.

Sponsor strength remains important. Developers with a track record of managing slow exits and protecting lender interests are favoured over those who treat exit finance as an entitlement.

Common Challenges And Misconceptions

A common misconception is that slow sales indicate overpricing or market failure. In many cases, pricing is correct, but buyer caution has increased. Lenders recognise this distinction, but they will not ignore timing risk.

Another challenge is assuming the original development lender will automatically extend. In 2026, many lenders are constrained by fund life, capital allocation, or internal risk limits, even where projects are performing.

Developers also underestimate how quickly margin can be eroded by forced discounting. A rushed bulk sale to clear debt can permanently impair project returns compared to a structured exit.

Where Most Borrowers Inadvertently Go Wrong In 2026

Many developers wait until the final months of a development loan before addressing exit risk. By this stage, leverage is limited, negotiating power is reduced, and lender choice narrows significantly.

Approaching exit lenders reactively, without reframing the asset as stabilised rather than speculative, often leads to declines or punitive terms.

This is where Willow Private Finance adds the most value: intervening before another application is made and controlling how the case is positioned to market.

Structuring Strategies That Improve Approval Odds

Successful exit finance structures in 2026 prioritise flexibility and control. Conservative leverage, even if uncomfortable, often unlocks better pricing and covenant headroom.

Let-and-hold strategies are increasingly common, particularly where rental demand is strong. Demonstrating interim income can materially improve exit terms and provide optionality.

Phased exits — refinancing only the unsold portion rather than the entire scheme — can also reduce costs and improve lender appetite.

Above all, clarity of strategy matters. Lenders back plans that acknowledge market reality rather than defend outdated appraisals.

Hypothetical Scenario: Prime Scheme With Slower Absorption

Consider a completed prime development of ten units, with six sold and four remaining at loan maturity. The original development lender requires repayment, but market conditions suggest a further 12–18 months to complete sales at target pricing.

An exit facility is arranged against the unsold units only, allowing the developer to repay the development loan, retain pricing discipline, and complete sales over time. The final units sell without discounting, preserving margin that would otherwise have been lost.

This scenario illustrates how exit finance can be a value-preserving tool rather than a distress solution.

Outlook For 2026 And Beyond

Sales velocity risk is likely to remain a feature of the prime development market while interest rates stay elevated and buyer caution persists. Development exits will increasingly be structured around optionality rather than speed.

Developers who plan exits early, stress-test absorption assumptions, and remain flexible in strategy will be best placed to navigate this environment.

Frequently Asked Questions

What does the “sales velocity trap” actually mean in practical terms?
The sales velocity trap describes a situation where a development completes broadly as planned, but unit sales do not progress quickly enough to meet the assumptions built into the original development loan. In 2026, this is less about lack of demand and more about slower buyer decision-making, longer conveyancing timelines, and increased caution at higher price points. The trap arises because development finance is time-bound: even a viable scheme can face refinancing pressure if sales lag loan maturity.

Why is this happening more frequently in 2026 than in previous years?
Higher interest rates have changed buyer behaviour, particularly in prime and discretionary markets. While demand still exists, purchasers are taking longer to commit, often due to chain complexity, funding scrutiny, or a desire for greater price certainty. Development loans written in 2020–2022 were rarely stress-tested for prolonged absorption periods at higher rates, which has exposed timing risk rather than fundamental project weakness.

If a scheme is high quality, why won’t the original development lender simply extend the loan?
In some cases they will, but extensions are far less automatic than developers expect. Many development lenders operate within fixed fund lives, capital allocation limits, or internal exposure caps that restrict their ability to extend facilities, even on performing schemes. In 2026, lenders are also under greater pressure from their own investors to recycle capital, making extensions the exception rather than the rule.

How is development exit finance different from bridging finance?
While exit finance often sits within the broader bridging market, it is underwritten very differently from traditional short-term loans. Exit lenders assess the scheme as a completed or near-completed asset, focusing on stabilisation, saleability, and downside protection rather than construction risk. The objective is not speed at any cost, but controlled refinancing that allows sales to complete without forced discounting.

Can exit finance be arranged against only the unsold units rather than the whole scheme?
Yes, and this is increasingly common in 2026. Where part of a scheme has already been sold, lenders may refinance only the remaining units, allowing the development loan to be repaid while isolating risk. This approach can materially reduce borrowing costs and improve lender appetite, provided the legal and title structure allows for it.

Do lenders expect price reductions as part of an exit finance strategy?
Not automatically. Lenders are more concerned with realism than with speed. If pricing is supported by completed transactions and comparable evidence, lenders may be comfortable with longer sale timelines. However, developers who insist on peak pricing without evidence often face tougher terms, as lenders discount aspirational assumptions heavily.

Is letting unsold units a viable strategy under exit finance?
In many cases, yes. Short-term or medium-term letting can provide income cover, demonstrate asset resilience, and improve lender confidence. However, lenders will assess the impact on eventual sale value, tenancy structure, and exit flexibility. Letting is viewed as a strategic tool, not a default solution, and must be aligned with the longer-term disposal plan.

How early should developers start planning for a potential exit finance requirement?
Ideally, exit planning should begin at least 6–12 months before development loan maturity. Early planning preserves leverage, lender choice, and negotiating power. Developers who wait until maturity pressure is imminent often find their options constrained, pricing higher, and structures more restrictive.

What is the biggest mistake developers make when dealing with slow sales?
The most common mistake is treating slow sales as a temporary inconvenience rather than a structural timing issue. This leads to delayed engagement with advisers and lenders, reducing available options. Another frequent error is approaching exit lenders without reframing the asset as stabilised, which results in applications being assessed under inappropriate risk assumptions.



Can exit finance actually protect profit rather than erode it?
Yes, when used correctly. While exit finance carries a cost, it can prevent forced sales or bulk disposals at discounted pricing, which often destroy significantly more value. In many 2026 cases, accepting the cost of structured exit finance preserves overall project margin and developer control.

How Willow Private Finance Can Help

Willow Private Finance works with developers facing slower-than-expected exits in 2026. As an independent, whole-of-market intermediary, we structure development exit finance that reflects lender reality and protects residual value.

Our role is to manage sequencing, lender selection, and narrative — ensuring that completed schemes are positioned as stabilised assets with multiple exit routes, not failed developments.

📞 Want Help Structuring Development Exit Finance In 2026?

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