Bank lending to smaller property investors falls 14% in five years – how can they avoid missing out on falling property prices?  

Smaller property investors must widen their search for finance to non-bank lenders

Bank lending to smaller property investors has fallen 14% over the last five years, just as property prices are creating some of the most attractive buying opportunities we’ve seen in years.

Our research shows the value of lending from UK-regulated banks to small and medium-sized UK property investment businesses has fallen to £186bn in March 31 2026, down from £216bn in March 31 2021.

Over the same period, we have seen that lending from banks to large property investment companies rose by 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 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.

The shift in lending away from small investors is due to banks’ lending models often rating smaller property investors as higher risk, limiting their access to finance. These include high-street, challenger, and boutique banks. 

Over that five-year period high-street banks have also prioritised large corporate loans and major M&A transactions, often alongside private equity firms. 

Nicholas Christofi, CEO 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.” 

Nicholas Christofi says that non-bank lenders that often provide property investment finance include specialist and 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 mortgages 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.  

Nicholas Christofi says: “The boom in the UK bridging market and specialist mortgage market shows that alternative funding providers are willing to step in for smaller investors.” 

It has been reported that many UK buy-to-let landlords have been selling properties at reduced prices following the introduction of the Renters’ Rights Act. 

Nicholas Christofi says: “Specific events in the property market mean a significant number of property assets are currently being sold at reduced prices. That window of opportunity is unlikely to remain open indefinitely.”