Fixed Interest Mezzanine refers to a mezzanine facility that charges a set interest rate throughout the term of the loan. This structure is attractive to developers in property development finance UK as it provides clarity over funding costs. Payments may be monthly or capitalised and rolled up into the total repayment at the end of the loan. Fixed interest mezzanine funding suits projects with strong exit certainty and allows developers to retain full equity upside while minimising dilution.
Within a Mezzanine Loan structure, fixed interest terms provide a defined cost of capital that simplifies financial modelling and exit planning. This predictability is particularly valuable where development timelines and sales values are well evidenced, allowing developers to assess margin sensitivity with greater confidence. However, the certainty of a fixed rate can limit flexibility if market conditions shift, and obligations under provisions such as Default Rate still apply in downside scenarios. Lenders and borrowers will typically monitor affordability through metrics like Interest Cover Ratio (ICR), ensuring the project can sustain agreed returns throughout the loan term.
View glossary entry