THE PROPERTY FILTER TAKE
Bank lending to smaller UK property investors fell 14% over five years, dropping from £216bn to £186bn, while lending to large property businesses rose 20% to £375bn over the same period (Karis Capital).
The numbers are pointing to a structural squeeze: smaller investors are losing mainstream bank access at the exact moment City of London prices are down 20.2% year-on-year, a buying window that may not stay open long.
Consider speaking to a specialist or bridging lender about your next deal - outstanding bridging loans grew 30% to £13.4bn in 2025, and the specialist mortgage market is forecast to reach £54bn by 2029 as non-bank alternatives expand.
Bank lending to smaller UK property investors fell 14% over five years, dropping from £216bn in March 2021 to £186bn in March 2026. Over the same period, lending to large property businesses rose 20% to £375bn, per Karis Capital's research.
The gap between large and small investor access to bank finance is not closing. The data shows it is widening.
The Widening Split Between Large and Small Investors
Karis Capital, a specialist real estate debt and insurance advisory firm, found that UK-regulated banks increasingly rate smaller property investors as higher risk. High-street, challenger, and boutique banks are all part of this picture.
Over the same five-year period, banks have also prioritised large corporate loans and major M&A (mergers and acquisitions) transactions, often alongside private equity firms. The logic for banks is straightforward: fewer, larger deals are more efficient to underwrite and manage.
Nicholas Christofi, chief executive of Karis Capital, put it directly: "Many banks prioritise larger lending deals, and they see that as a more efficient way of deploying their capital."
Year-on-year, the direction is consistent. Bank lending to smaller investors is down; bank lending to larger investors is up. The underlying picture is one of structural consolidation in who the banks are willing to back.
A Rare Buying Window - With a Finance Problem
The timing matters. In the year to 31 March 2026, property prices fell 20.2% in the City of London, 11.3% in Westminster, and 7.5% in Kensington and Chelsea, per Karis Capital's research. Discounts at this scale in prime London markets are uncommon.
The Renters' Rights Act has also pushed some buy-to-let landlords to sell, adding further discounted stock to the market. The problem for smaller investors is access to finance.
Christofi noted that "the market is currently offering very attractive buying opportunities, but many smaller property investors are finding their usual lenders are less willing to lend."
You can model whether a deal stacks at current prices and rates using the Property Filter stress test calculator. It covers buy-to-let income coverage ratios (ICR) and rental yield viability against different lending scenarios.
Christofi added: "That window of opportunity is unlikely to remain open indefinitely."
Where Alternative Finance Is Filling the Gap
The data shows non-bank lending is growing fast. Outstanding bridging loans in the UK rose 30% in 2025 to £13.4bn, up from £10.3bn in 2024. Bridging finance is short-term lending typically used when conventional bank funding is not available.
The specialist mortgage market, which serves borrowers with non-standard profiles, is forecast to grow 68% from £32bn in 2023 to £54bn by 2029.
Christofi's position is clear: "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."
For investors reviewing their options, the Property Filter negotiation and finance hub covers how to approach lender selection as part of a deal strategy. Understanding which lender types fit your deal profile is now as important as identifying the deal itself - see the property investment strategies hub for a practical framework. You can also run deal-level calculations across scenarios using the free calculators hub.
"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 added.
Key takeaways
Bank lending to smaller UK property investors fell 14% between March 2021 and March 2026, from £216bn to £186bn (Karis Capital)
Lending to large property businesses rose 20% to £375bn over the same period, reflecting a widening split in how banks allocate capital
Prime London prices are down as much as 20.2% year-on-year, creating buying opportunities for investors who can secure alternative finance
Outstanding UK bridging loans grew 30% in 2025 to £13.4bn, up from £10.3bn in 2024, as non-bank lending fills the gap
The specialist mortgage market is forecast to reach £54bn by 2029, up 68% from £32bn in 2023
Bank lending to smaller UK property investors fell 14% over five years, dropping from £216bn in March 2021 to £186bn in March 2026. Over the same period, lending to large property businesses rose 20% to £375bn, per Karis Capital's research.
The gap between large and small investor access to bank finance is not closing. The data shows it is widening.
The Widening Split Between Large and Small Investors
Karis Capital, a specialist real estate debt and insurance advisory firm, found that UK-regulated banks increasingly rate smaller property investors as higher risk. High-street, challenger, and boutique banks are all part of this picture.
Over the same five-year period, banks have also prioritised large corporate loans and major M&A (mergers and acquisitions) transactions, often alongside private equity firms. The logic for banks is straightforward: fewer, larger deals are more efficient to underwrite and manage.
Nicholas Christofi, chief executive of Karis Capital, put it directly: "Many banks prioritise larger lending deals, and they see that as a more efficient way of deploying their capital."
Year-on-year, the direction is consistent. Bank lending to smaller investors is down; bank lending to larger investors is up. The underlying picture is one of structural consolidation in who the banks are willing to back.
A Rare Buying Window - With a Finance Problem
The timing matters. In the year to 31 March 2026, property prices fell 20.2% in the City of London, 11.3% in Westminster, and 7.5% in Kensington and Chelsea, per Karis Capital's research. Discounts at this scale in prime London markets are uncommon.
The Renters' Rights Act has also pushed some buy-to-let landlords to sell, adding further discounted stock to the market. The problem for smaller investors is access to finance.
Christofi noted that "the market is currently offering very attractive buying opportunities, but many smaller property investors are finding their usual lenders are less willing to lend."
You can model whether a deal stacks at current prices and rates using the Property Filter stress test calculator. It covers buy-to-let income coverage ratios (ICR) and rental yield viability against different lending scenarios.
Christofi added: "That window of opportunity is unlikely to remain open indefinitely."
Where Alternative Finance Is Filling the Gap
The data shows non-bank lending is growing fast. Outstanding bridging loans in the UK rose 30% in 2025 to £13.4bn, up from £10.3bn in 2024. Bridging finance is short-term lending typically used when conventional bank funding is not available.
The specialist mortgage market, which serves borrowers with non-standard profiles, is forecast to grow 68% from £32bn in 2023 to £54bn by 2029.
Christofi's position is clear: "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."
For investors reviewing their options, the Property Filter negotiation and finance hub covers how to approach lender selection as part of a deal strategy. Understanding which lender types fit your deal profile is now as important as identifying the deal itself - see the property investment strategies hub for a practical framework. You can also run deal-level calculations across scenarios using the free calculators hub.
"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 added.
Key takeaways
Bank lending to smaller UK property investors fell 14% between March 2021 and March 2026, from £216bn to £186bn (Karis Capital)
Lending to large property businesses rose 20% to £375bn over the same period, reflecting a widening split in how banks allocate capital
Prime London prices are down as much as 20.2% year-on-year, creating buying opportunities for investors who can secure alternative finance
Outstanding UK bridging loans grew 30% in 2025 to £13.4bn, up from £10.3bn in 2024, as non-bank lending fills the gap
The specialist mortgage market is forecast to reach £54bn by 2029, up 68% from £32bn in 2023
Frequently asked questions
Frequently asked questions
Why are banks lending less to smaller property investors?
What alternative finance options are available to smaller property investors?
How much have prime London property prices fallen?
Is the trend in bank lending likely to reverse for smaller investors?
How can I check whether a deal is viable under current lending conditions?
