Smaller property investment firms are finding it tougher to get finance as lenders often rate them as higher risk, according to new research.

The value of lending from UK-regulated banks to SMEs dropped 14% to £186 billion in the last five years to March, reports real estate debt and insurance advisory firm Karis Capital. Much of that lending was redirected to large property investment businesses, whose borrowing from banks rose 20% to £375 billion during the same period.

High-street banks have also prioritised large corporate loans and major M&A transactions, often alongside private equity firms.

The decline in lending comes just as falling property prices have created attractive buying opportunities. In the year to March, average property prices fell by 20% in the City of London, 11% in Westminster and 7% in Kensington and Chelsea, reports the firm.

Market

Nicholas Christofi, CEO of Karis Capital, says the market is currently offering very attractive buying opportunities, but many smaller property investors are finding their usual lenders are less willing to lend.

He says non-bank, specialist, bridging lenders are often happier to lend in smaller lot sizes and are much more open to bespoke finance deals. “If you want to get the most competitive finance then you need to look at all the lenders and not just the bigger banks,” Christofi adds.

“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.”

Value

The value of outstanding bridging loans - typically used by borrowers with limited access to traditional bank funding - in the UK rose 30% in 2025 to £13.4 billion, up from £10.3 billion in 2024.

Karis Capital reports that 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.

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

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