The study shows that bank lending to this segment stood at £186 billion as of 31 March 2026, down from £216 billion on the same date in 2021

Lending from UK-regulated banks to small and medium-sized property investment businesses dropped by 14% over the past five years, according to new research from specialist real estate debt and insurance advisory firm Karis Capital.

The study shows that bank lending to this segment stood at £186 billion as of 31 March 2026, down from £216 billion on the same date in 2021.

Karis Capital said the decline reflects how banks’ internal risk models tend to classify smaller property investors as higher risk, restricting their access to finance. This applies across high-street, challenger and boutique banks.

Much of the lending that has moved away from small investors has gone instead to large property investment firms, whose bank borrowing rose by 20% to £375 billion over the same five-year period.

The drop in lending to smaller investors coincides with a period of declining property prices, which the firm said has created buying opportunities. In the year to 31 March 2026, average property prices decline by 20.2% in the City of London, 11.3% in Westminster and 7.5% in Kensington and Chelsea.

Karis Capital also noted that over the same five years, high-street banks have increasingly focused their lending on large corporate transactions and major mergers and acquisitions, often working alongside private equity firms.

Smaller property investors should look beyond banks to take advantage of falling property prices, said Nicholas Christofi, chief executive of Karis Capital. 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 said non-bank lenders that commonly provide finance to property investors include specialist lenders, bridging lenders and family offices.

Non-bank lenders are often happier to lend in smaller lot sizes and are much more open to bespoke finance deals, he said.

He said: 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.