New Build Developer Incentives — How Lenders Treat Them August 2026
| Incentive type | Cash equivalent | Lender treatment (up to 5% total) | Lender treatment (above 5% total) |
|---|---|---|---|
| Cashback (unrestricted) | Direct cash to buyer at completion | Included in total incentive value calculation | Reduces valuation base by excess over 5% |
| Paid stamp duty (SDLT) | SDLT amount paid by developer on buyer's behalf | Included in total incentive value | Reduces valuation base if total incentives exceed 5% |
| Furniture package | Estimated cash value of furniture provided | Included in total incentive value | Same — reduces valuation base |
| Spec upgrades (fitted kitchen, flooring) | Estimated value of upgrades above base spec | May or may not be included — lender-specific. Ask DBF. | Same — may reduce valuation base |
| Developer price reduction | Difference between original asking price and agreed purchase price | Included — treated as direct incentive | Reduces valuation base significantly if large reduction |
| Own New Rate Reducer contribution | 3% or 5% of purchase price | At 5%: sits exactly at the 5% threshold — no valuation reduction | Rate Reducer at 5%: at the threshold. No excess. |
Worked example
New build flat: £350,000. Developer offers: cashback £10,000 + furniture package £7,000 + paid SDLT £6,000 = £23,000 total.
- £23,000 / £350,000 = 6.57% total incentive (above 5% threshold).
- Excess above 5%: 1.57% × £350,000 = £5,495. Lender reduces base to £344,505.
- 15% deposit on £350,000: £52,500. At 85% LTV on reduced base £344,505: max loan £292,829.
- Actual loan needed: £350,000 - £52,500 = £297,500. Exceeds lender's max by £4,671.
- Solution: DBF reduces incentive package to 5% (£17,500) — removing £5,500 of furniture package.
- With 5% total incentives: no valuation reduction. £297,500 loan achievable at 85% LTV on £350,000.
- Loss: £5,500 furniture package. Gain: mortgage proceeds.