Finance for Building Works

The market context you need to plan with confidence

The cost of building works in the UK is stabilising, but it is not static. In the first half of 2025, the construction sector grew modestly at around 1-2%, supported by a Bank of England rate environment that has eased financing costs and lifted confidence. Materials inflation has moderated after recent supply chain disruption, yet labour remains the pressure point as skilled worker shortages keep wage costs elevated. For homeowners, landlords, and SMEs, this means projects are more viable than last year, but budgets still require discipline.

Tender prices for buildings are forecast to rise by roughly 2-4% this year, with infrastructure inflation higher at 4-6%. Public investment is underpinning activity in energy, water, schools, and hospitals, and industrial construction has a tailwind from defence and advanced manufacturing. Housing activity has improved as mortgage approvals pick up and reservations rise, although affordability constraints remain. The net effect is cautious optimism and tighter financial vetting - lenders and clients want robust proposals, clear risk controls, and credible delivery plans.

The shift toward regional investment and sustainable transport is reshaping where opportunities arise and how they are financed. Green finance is growing too, opening routes for projects that improve environmental performance or support nature recovery. At the same time, insolvencies have eased from their peak, but risk awareness is still high, which is encouraging collaborative contracting and innovative funding structures.

Understanding APR is only the start - knowing how interest, fees, and timelines interact with tender price trends and labour pressures is what protects your budget.

Kandoo works across this landscape as a UK-based retail finance broker, helping you match project goals with affordable, suitable finance. The right option depends on scope, timeline, and risk appetite - and on building a case lenders will trust.

Who should read this

If you are planning an extension, refurbishment, energy upgrade, or a small commercial fit-out, this guide is for you. Homeowners weighing remortgaging against personal loans, landlords balancing rental yields with retrofit costs, and small developers navigating cash flow around staged payments will find practical options here. It is also relevant for contractors and project managers who need clients to understand financing constraints and secure funds before mobilisation. We draw on current UK market dynamics so you can forecast costs, pressure-test returns, and choose finance that fits your delivery plan.

Your funding routes at a glance

1. Unsecured home improvement loan - fixed terms, quick decisions.

2. Secured homeowner loan - larger sums, property-backed, longer terms.

3. Remortgage or further advance - tap equity for lower rates.

4. Bridging finance - short-term funding for urgent works or gaps.

5. Business loan or asset finance - for landlords and SMEs.

6. Green finance products - incentives for energy efficiency and nature-positive works.

7. Grants and regional programmes - align with local transport and regeneration priorities.

8. Partner or vendor finance - staged payments, collaborative contracting.

What it could cost - and what it could deliver

Who is likely to qualify and on what basis

Eligibility hinges on affordability, credit history, and the strength of your project plan. Lenders will assess income stability, existing debts, and loan-to-value if you are securing against property. For unsecured options, expect tighter limits and shorter terms. Secured lending usually suits larger projects where valuations support the requested amount and there is clear headroom at your chosen LTV. Remortgaging depends on equity, early repayment terms, and the timing of rate fixes. For landlords and SMEs, lenders examine trading performance, rent rolls, and covenants. Where public or green funding is involved, you may need to demonstrate energy savings, biodiversity outcomes, or alignment with regional priorities such as sustainable transport or regeneration. Given today’s cautious environment and reduced insolvency rates that still sit above historic norms, robust contractor vetting and an itemised cost plan can materially improve outcomes. Kandoo can help package applications, compare terms across lenders, and highlight routes where your profile and project data meet current credit appetite.

From application to approval - what happens when

1. Define scope, budget, and timeline - include contingencies.

2. Gather income, ID, and property documents - keep digital copies.

3. Obtain quotes and programme - check labour availability.

4. Compare finance options - rate, fees, flexibility, security.

5. Submit application - accurate data reduces delays.

6. Complete valuations and legal checks - respond promptly.

7. Finalise offer and draw down - align with start dates.

Trade-offs to weigh before you sign

Key checks before committing

A realistic programme is your first line of defence. With tender prices trending 2-4% for buildings and labour still tight, build a contingency of at least 10-15% and stress test against a modest delay. Verify contractor solvency and cash management practices, since insolvencies have fallen but remain a live risk. Check how rate changes could affect your repayments and whether a fixed or variable structure suits your income profile. If you are pursuing green finance or regional funding, line up evidence early - energy models, EPC baselines, or planning consents often dictate timing. For remortgages, map your deal expiry against application lead times and valuation bookings. A short, early conversation with a broker can surface constraints and avoid costly rework.

If plan A does not fit, consider these

1. Stage the works to reduce peak funding needs.

2. Blend products - for example, unsecured loan plus grant.

3. Use a further advance instead of a full remortgage.

4. Explore collaborative contracting with milestone payments.

5. Defer non-critical scope until rates or capacity improve.

Frequently asked questions

Q: Are rates likely to fall further this year? A: The current outlook is stable after recent cuts that brought the base rate near 4%. Plan for modest variability and prioritise affordability on today’s numbers rather than speculative declines.

Q: How do labour shortages affect my budget? A: Labour is the main driver of tender inflation. Even with materials stable, skilled trades command higher rates, so allow contingency and lock in schedules early.

Q: Is bridging finance too expensive for small projects? A: It can be costlier than term lending, but speed can save money where delays would trigger higher tender prices or missed contractor slots. Ensure you have a credible exit.

Q: Can I access green finance for a standard refurbishment? A: If you include energy upgrades that deliver measurable savings or EPC improvements, you may qualify for better terms or grants. Evidence and compliance are essential.

Q: How do regional schemes help? A: Devolved and city-region programmes increasingly back transport-linked regeneration and sustainable projects. Aligning your scope with local priorities can unlock grants or match funding.

Q: Will a secured loan affect a future remortgage? A: Yes. Additional charges and higher LTV can limit options later. Model the combined debt position before committing.

Move forward with clarity

If you are ready to scope finance for building works, Kandoo can compare options across trusted UK lenders, factoring in current tender trends, labour pressures, and eligibility criteria. We will help you position your application, select terms that fit your cash flow, and stay on programme.

Important information

This guide is for general information only and is not personal advice. Finance is subject to status, terms, and lender criteria. Costs and availability can change. Seek independent advice where appropriate before committing.