Rory Wilkinson, digital editor of Show House, recently caught up with Neal Moy, managing director of development finance at Paragon Bank, to find out more about the current state of the market, the issues facing the industry, and what’s next for the company.
Tell us a little about yourself and your role at Paragon Bank
I lead Paragon’s Development Finance division. My job is to set strategy, grow our lending, broaden our product proposition and lead the team that supports SME developers across the UK.
I came into property lending from retail banking, in a slightly roundabout way. An early conversation with a Head of Property Lending opened the door, and I have been in the sector ever since. What keeps me here is the tangible outcome, seeing sites transformed into homes and places that add economic value and create vibrant communities.
A big part of the role is staying close to the real issues developers are facing and making sure our proposition keeps pace, whether that is capacity, product design or how we show up in industry debates that affect delivery. We are committed to ensuring the voices of SME developers are heard.
What is the focus of the Development Finance division at Paragon?
Our focus is to provide specialist development finance to SME developers, helping good schemes get built and, ultimately, supporting housing delivery across the UK. We work with hundreds of SME developers and have funded over 13,000 new homes since 2018, so the work is substantial and nationwide – from Cornwall to Glasgow.
Over the last year we have increased our maximum loan size from £35million to £60million. That is a practical and responsive change which is enabling us to support larger and more complex projects. It also gives experienced SME developers more headroom to deliver ambitious schemes, including those that span phases or combine multiple elements.
That additional capacity sits alongside a broader diversification and regional strategy. We have grown our presence in regions all across the UK, as well as expanded our Purpose-Built Student Accommodation offering and diversified into areas such as Build-to-Rent, care homes and later living. We’re always looking to respond quickly to where demand is moving and support a wider mix of schemes.
What is the state-of-play of the development finance market? After plenty of turmoil in recent years, is the industry seeing some consistency?
The last few years have reinforced how quickly conditions can change. Developers have had to manage unprecedented volatility in build costs, sales rates and wider confidence. From our perspective, there are signs of improvement in terms of stability, but it is not uniform and the operating environment remains demanding.
Last financial year, we recorded a 31% jump in our new business pipeline. That suggests there is an appetite for well-structured schemes, even while developers continue to deal with pressure points.
What matters now is predictability. A tall ask given the turbulent geopolitical environment in recent years, but the clearer the pathway is through planning, conditions and delivery, the easier it is for developers and lenders to commit capital with confidence.
Are you seeing a change in demand for finance in relation to the types of projects being delivered?
Yes, we’re seeing demand broaden beyond traditional build-to-sell housing, driven in part by demographic change and in part by where different tenures and asset classes can meet local need.
Build-to-Rent is a good example of how finance needs to flex around the reality of delivery. We expanded our proposition to include revolving credit facilities designed specifically for BtR schemes. These allow developers to refinance completed units into a short‑term stabilisation loan as they are let, rather than waiting for the whole scheme to complete. That approach frees up capital for the next phase, reduces overall borrowing costs and supports faster build‑out, while giving developers the option to retain a stabilised, income‑producing asset rather than exiting at practical completion.
We’re also expanding into later living and care home sectors. We have backed later living delivery, including a £30million facility supporting a Beaconsfield scheme for over-55s, and we recently launched a specialist care home funding product with terms of 20 to 36 months and a minimum facility size of £10million. We’re seeing high demand in this segment already.
The common thread is that SME developers are innovating and adapting, and our job is to make sure our capacity and product range evolve with them. We recognise that finance should not be the limiting factor when there is clear demand for the end product.
What do you think is the biggest factor holding back the delivery of new homes currently?
Planning remains the biggest constraint in my view, particularly the lack of consistency and accountability at a local level in how decisions are made and how long they take. Too often, developers find that consents are ultimately won on appeal, but only after long delays that add cost and uncertainty to schemes.
Alongside that, there are policy and administrative burdens that can hit cashflow at exactly the wrong time. Through our work with SME developers, we see how council tax liabilities can be triggered before homes are sold or occupied, sometimes even before they are habitable, because of mechanisms like Completion Notices and early valuation listing. That creates holding costs without associated income, which is especially difficult for SMEs with less liquidity to absorb surprises.
That is why we have partnered with the Home Builders Federation on research into council tax premiums and planning process frictions, such as Planning Performance Agreements and delays in discharging conditions. The aim is to champion SME developers and bring evidence into the policy conversation, to ultimately improve predictability for developers and lenders alike.
The recent announcement of the Future Homes Standard signifies a watershed moment for the housebuilding industry. Will the shift to low-carbon housing be reflected in the finance market?
Yes, and it already is. As standards tighten and customer expectations move on, finance needs to recognise that better-performing homes are part of the direction of travel, not a nice-to-have.
At Paragon, we have been doing that through our Green Homes Initiative, which provides a 50% reduction on loan exit fees where developments achieve EPC A on 80% or more of private units, with the remainder at least EPC C. It is a straightforward incentive that supports developers who are building to the highest energy performance standards.
High demand from developers building energy-efficient homes has seen us commit over £330million in lending through our Green Homes Initiative so far – a number we expect to rise. As the Future Homes Standard comes into effect, I expect to see more lenders building sustainability incentives and clearer criteria into product design and underwriting, because energy performance will increasingly influence marketability and long-term resilience.
What does the future look like for the Development Finance division at Paragon?
It’s always a juggle to balance ambition and discipline, particularly in a challenging economic environment, but the direction of travel in terms of housing policy is looking good, which I hope will help grow confidence across the sector. We’re continuing to deliver growth and increasing our maximum loan size to £60million is part of that, because it enables us to support larger and more complex schemes while continuing to back the SME developers we work with.
We will also keep broadening the proposition into sectors where demand is structurally supported; later living and Build to Rent being just two examples of how we are responding to shifting needs with targeted finance solutions.
Finally, we will keep using our platform to champion SME developers and raise the issues that hold back delivery. Our partnership with the Home Builders Federation on council tax premiums and planning process pinch points is about making sure the lived experience of smaller developers is heard, backed by evidence and translated into practical recommendations that improve certainty for everyone involved in getting homes built.
