The pressure is on: private credit may be facing challenges, but it will retain its critical role in UK real estate finance.

18 June 2026

By Nick Hammond, real estate restructuring expert in the Colliers Capital Advisory team, providing strategic funding and restructuring advice across all UK property sectors.

The rise of private credit has become one of the most significant shifts in UK real estate finance over the past decade. As traditional banks have reduced exposure to higher-risk lending, non-bank lenders (including debt funds, insurance backed platforms and specialist credit managers) have rapidly expanded into commercial real estate, development finance and construction lending.

Consequently, private credit has grown from a niche source of alternative funding into a core part of the capital stack. Global private credit assets are now estimated at close to $2tn, with the UK emerging as one of Europe’s largest markets. The latest Bayes Business School research shows that new lending for UK commercial real estate reached its highest level in a decade in 2025, at £52.7bn, with debt funds among the largest contributors to growth.

How did we get here?

Regulatory reforms introduced after 2008 made development and transitional real estate lending less attractive. Meanwhile, institutional investors facing lower returns in traditional fixed-income markets sought higher-yielding alternatives.

Another key theme has been market segmentation, with several investment managers raising large pools of capital dedicated to real estate lending. Such lenders can often structure bespoke facilities, underwrite complex business plans and execute deals quickly, which is critical in a market where timing pressures are acute.

This has been particularly evident in construction and transitional real estate lending, including bridging or mezzanine loans and asset-based lending, which is often short term and operationally complex.

“If interest rates and asset values stabilise, private credit could demonstrate its resilience and flexibility.”

Stress tests

However, the sector is now facing its first meaningful stress test. Rising borrowing costs, refinancing pressures and weaker asset values are exposing vulnerabilities. One of the clearest examples has been the recent collapse of Market Financial Solutions (MFS), a UK bridging and buy-to-let lender that entered administration amid allegations of fraud and collateral irregularities. The failure has highlighted the highly interconnected nature of modern private lending markets, with major banks, institutional investors and private credit funds all exposed as a result.

Meanwhile, regulatory and investor scrutiny has intensified around governance, transparency and underwriting standards amid growing concerns over opacity, the true extent of leverage and covenant structures, which could all amplify the extent of systemic risk if market conditions deteriorate.

Another concern is refinancing risk. Around 60% of UK commercial property lending now relates to

refinancing and a significant volume of loans originated in the low interest rate environment of 2020–2022 will mature in the next 12–24 months. Private credit lenders, while flexible, are not immune to capital constraints and may be less willing to extend underperforming loans without fresh equity.

Liquidity mismatches also warrant attention. Many private credit funds offer periodic redemptions while holding relatively illiquid loans. This could create pressure to sell assets or restrict withdrawals, particularly if investor sentiment shifts – as is already being seen.

Looking ahead

Private credit is likely to remain an important aspect of UK real estate finance. Banks are expected to stay relatively cautious and refinancing pressures will persist, leaving alternative lenders with continued opportunities. Meanwhile, stressed and distressed opportunities are increasing, creating a favourable environment for agile and opportunistic lenders that are able to price risk effectively.

While a systemic crisis seems unlikely, the market is entering a more challenging phase, with alternative lenders now facing the demands of a full credit cycle. If interest rates and asset values stabilise, private credit could demonstrate its resilience and flexibility, but economic and geopolitical uncertainty continues to challenge. In any event, the market is likely to see further consolidation and rising restructuring activity in the months ahead.