The ENABLE guarantee is expected to support the building of new housing with a value of more than £500m over the lifetime of the guarantee.

It is the first time the government-owned BBB has used its ENABLE guarantee specifically for the housebuilding sector.

The guarantee programme encourages banks to increase their lending to SMEs by reducing the amount of capital required to be held against such lending and sees the government take on a portion of the counterparty's risk on a portfolio of loans to smaller businesses in return for a fee.

This means UTB will allocate this additional capital to increase its funding to new-build and redevelopment projects undertaken by SME housebuilders and developers.

Graham Davin, CEO of UTB (pictured above), said it was now able to promote greater access to funding for SME housebuilders and felt that development lending was a complex area where specialist banks could make a large difference.

“The culmination of our joint efforts to adapt the BBB's existing guarantee to make it suitable for property development loans is a meaningful improvement to the capital efficiency of the bank for these loans.

“This allows us to support more housebuilding projects across the country.

“This transaction is also a great example of the value of co-operative state and private sector engagement.”

The agreement was welcomed by Alok Sharma, housing and planning minister, who said that access for finance was a key barrier for SME housebuilders entering the market.

“That's why we launched the Home Building Fund last year to support smaller builders and to help diversify the housing market, delivering thousands of homes and jobs in the process.

“It's great to see the ENABLE guarantee scheme being extended to SME housebuilders, giving even more SME businesses in this sector the chance to deliver the housing this country needs.”

A recent survey by the Federation of Master Builders (FMB) found that 54% of SME housebuilders reported a lack of finance constrained their ability to build more homes.

Brian Berry, chief executive of the FMB, added: “The picture has improved slightly in recent years through the increased prevalence and appetite among smaller, specialist lenders, but these lenders face their own barriers, not least in the capital requirements placed on them.

“The BBB's action to help ameliorate this is a big step forward and we hope that this agreement with UTB proves a successful model that can be replicated and extended.”

Keith Morgan, CEO of the BBB, said that banks had frequently reported that the high capital requirements associated with development lending had restricted their ability to lend to SME housebuilders.

“Our ENABLE guarantee is specifically designed to address this issue.

“We are very pleased that our ENABLE guarantee will help UTB provide the extra finance that smaller housebuilders require to allow them to grow, succeed and build the new housing stock the country needs.”