Falling swap rates are giving a boost to developers looking to refinance projects in 2026, said Jonathan Samuels, CEO of Octane Capital.
Samuels said improving financing costs will help improve viability and restore confidence in the specialty lending market.
Octane Capital analyzed the average daily GBP interest rate on one and five years swap rates so far this year and compared them to the same period last year at this time, and also assessed the average daily swap rate movements over the past three months versus the previous three-month period.
The research shows that the average daily one-year swap rate so far this year is 3.77%, while the average daily five-year swap rate averages 3.94%.
This represents a notable decline compared to the same period last year, when the one-year swap rate averaged 4.44% and the five-year swap rate averaged 4.29%, representing a decrease of 0.67 and 0.35 percentage points respectively.
This downward trend is also evident from the analysis of the average daily swap rate of the past three months, compared to the previous three-month period.
Over the past three months, the average daily one-year swap rate has fallen to 3.84%, compared to 4.04% previously, while the average daily five-year swap rate has also fallen, from 4.02% to 3.92%.
Octane pointed out that swap rates play a crucial role in determining the cost of real estate financing, especially when it comes to refinancing completed projects or moving from short-term financing to longer-term loans.
As swap rates decline, lenders can price more competitively, improving affordability and making refinancing more accessible to borrowers.
According to Octane Capital, this is especially important for developers nearing the end of a project, where development financing can provide the time needed to sell units in a more orderly manner or refinance into longer-term facilities without being forced to discount sales.
Samuels (pictured) said: “The reduction in average daily swap rates since the start of the year is a very encouraging sign and reflects the fact that the broader credit environment continues to stabilize.
“For developers, this has a direct impact on their ability to refinance completed schemes. Lower swap rates support more competitive prices for exit financing, which in turn gives developers more flexibility and breathing space when it comes to repaying existing facilities and securing longer-term financing.
“After a challenging period where higher financing costs limited refinancing options, we are now seeing improving conditions that are helping unlock projects and support execution.”