Analysis by Karis Capital shows lending from UK-regulated banks to smaller property investment businesses declined from £216bn in March 2021 to £186bn by the end of March 2026. Over the same period, lending to larger property investment companies increased by 20% to £375bn.
Karis Capital said banks’ lending models typically classify smaller property investors as higher risk, reducing their access to finance, while larger businesses have benefited from increased lending.
The decline in lending comes at a time when lower property values have created potential buying opportunities in parts of the market.
According to the data, average property prices fell by 20.2% in the City of London, 11.3% in Westminster and 7.5% in Kensington and Chelsea in the year to 31 March 2026.
Karis Capital said banks have increasingly focused on larger corporate lending and major merger and acquisition transactions over the past five years, often working alongside private equity-backed investors, while lending to smaller property investment businesses has declined.
Nicholas Christofi, CEO of Karis Capital, said: “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 continued: “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 boom in the UK bridging market and specialist mortgage market shows that alternative funding providers are willing to step in for smaller investors,” he added.
