Bank lending to small property investors has fallen 14% over the last five years, even as falling property prices create attractive buying opportunities, according to new research from specialist real estate debt and insurance advisory firm, Karis Capital.
The value of lending from UK-regulated banks to small and medium-sized UK property investment businesses fell to £186bn in the year to 31 March 2026, down from £216bn in March 2021.
Karis Capital attributes the shift to banks’ lending models, which often rate smaller property investors as higher risk and limit their access to finance. This includes high-street, challenger and boutique banks.
Much of that lending has been redirected toward larger property investment businesses instead, whose borrowing from banks rose 20% to £375bn over the same period.
Smaller investors risk missing falling prices
The decline in lending comes just as falling property prices have created attractive buying opportunities. In the year to 31 March 2026, average property prices fell 20.2% in the City of London, 11.3% in Westminster and 7.5% in Kensington and Chelsea.
Over the same five-year period, high-street banks have also prioritised large corporate loans and major M&A transactions, often alongside private equity firms.
Nicholas Christofi, chief executive of Karis Capital (pictured), believes smaller investors need to broaden where they look for finance. “Smaller property investors should look beyond banks to take advantage of falling property prices,” he says.
“The market is currently offering very attractive buying opportunities, but many smaller property investors are finding their usual lenders are less willing to lend.”
“Non-bank lenders are often happier to lend in smaller lot sizes and are much more open to bespoke finance deals,” he explains.
“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,” he adds. “Many banks prioritise larger lending deals, and they see that as a more efficient way of deploying their capital.”
Bridging and specialist lending step in
The value of outstanding bridging loans in the UK rose 30% in 2025 to £13.4bn, up from £10.3bn in 2024. Bridging loans are short-term finance typically used by borrowers with limited access to traditional bank funding.
The specialist mortgage market is estimated to grow 68% to £54bn by 2029, up from £32bn in 2023. Specialist lenders typically serve borrowers with non-standard applications, such as the self-employed and those with impaired credit histories.
“The boom in the UK bridging market and specialist mortgage market shows that alternative funding providers are willing to step in for smaller investors,” Christofi says.
The findings come as many UK buy-to-let landlords have reportedly been selling properties at reduced prices following the introduction of the Renters’ Rights Act. “Specific events in the property market mean a significant number of property assets are currently being sold at reduced prices,” Christofi adds. “That window of opportunity is unlikely to remain open indefinitely.”
