Barclays said it would offer 875 million pounds of finance while Homes England, a government agency created at the start of the year, would provide the remaining 125 million pounds.
Britain's government aims to increase annual home-building to 300,000 from 217,000 last year, at a time when buying a home is unaffordable for many young Britons, especially in London and southern England.
The finance is targeted at small and medium-sized builders, who account for a much lower share of new construction than before the financial crisis.
Loans will range in size from 5 million pounds to a maximum 100 million pounds, and will cover up to 80 percent of costs or 70 percent of the value of the project, Barclays said.
Projects can include houses for purchase as well as social housing, privately rented housing and retirement homes.
"This new fund ... is a further important step by giving smaller builders access to the finance they need to get housing developments off the ground," housing minister James Brokenshire said.
Homes England said at its launch in January that it had 2.5 billion pounds of short-term finance for housing construction and 2 billion pounds available for longer-term infrastructure.
(Reporting by David Milliken, editing by Andy Bruce)