Banks typically lend to larger investors, leaving smaller investors to look elsewhere
The amount lent by UK-regulated banks to small and medium-sized UK property investment businesses has fallen by 14% over the last five years to £186bn by March 31, 2026. The figure is down from £216bn by March 31, 2021, according to new research by real estate debt and insurance advisory firm Karis Capital.
It says that banks, including high-street, challenger and boutique banks, operate lending models which often rate smaller property investors as higher risk, limiting their access to finance.
Investment redirected to larger operators
Instead, investment has been redirected to larger property investment businesses, with such borrowing from banks rising 20% to £375bn over the same period.
Over that five-year period, high-street banks have also prioritised large corporate loans and major M&A transactions, often alongside private equity firms.
However, with falling property prices making investment attractive, Nicholas Christofi, CEO of Karis Capital, said investors need to rethink their financing strategies.
“Smaller property investors should look beyond banks to take advantage of falling property prices. The market is currently offering very attractive buying opportunities but many smaller property investors are finding their usual lenders are less willing to lend,” he said.
He said smaller investors should look at non-bank lenders that often provide property investment finance, such as specialist, bridging lenders and family offices. “Non-bank lenders are often happier to lend in smaller lot sizes and are much more open to bespoke finance deals. Our view is that if you want to get the most competitive finance then you need to look at all the lenders and not just the bigger banks.”
The value of outstanding bridging loans in the UK rose 30% in 2025 to £13.4 billion, up from £10.3 billion in 2024, while the value of lending in the specialist mortgage market is estimated to grow 68% to £54 billion in 2029, up from £32 billion in 2023.
Christofi said: “The boom in the UK bridging market and specialist mortgage market shows that alternative funding providers are willing to step in for smaller investors.”
