Bank lending for small-scale property investment has plummeted in recent years.
New data shows that the value of lending from UK-regulated banks to small and medium-sized UK property investors has fallen 14% to £186 billion in March 2026, down from £216 billion in March 2021.
Real estate consultancy Karis Capital says that the shift in lending away from small investors is because banks’ lending models often rate smaller property investors as higher risk.
Much of that lending has been redirected to large property investment businesses, whose borrowing from banks rose 20% to £375bn over the same period (see graph below).
The decline in lending comes just as falling property prices have created attractive buying opportunities.
In the year to 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 that five-year period high-street banks have also prioritised large corporate loans and major Merger & Acquisition (M&A) transactions, often alongside private equity firms.
Nicholas Christofi, chief executive of Karis Capital, says: “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.”
Christofi adds that non-bank lenders that often provide property investment finance include specialist, bridging lenders and family offices.
He says: “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.
“Many banks prioritise larger lending deals and they see that as a more efficient way of deploying their capital.”
The value of outstanding bridging loans in the UK rose 30% in 2025 to £13.4 billion, up from £10.3 billion in 2024.
Bridging loans are short-term finance typically used by borrowers with limited access to traditional bank funding.
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.
Specialist lenders typically serve borrowers with non-standard applications, such as the self-employed and those with impaired credit histories.
This article is taken from Landlord Today