Artificial Intelligence (AI) has rapidly become a fundamental driver of transformation within the financial services sector, most notably in the area of real estate lending. According to AllAboutAI.com, over 85% of UK lenders now utilise AI tools to streamline operations and enhance decision-making processes, a significant shift for a sector often criticised for its outdated risk models and slow processes. However, this rise of AI poses a critical question for the alternative lending sector, which represents 41% of the UK market and prides itself on flexibility and a relationship-focused approach: can algorithms truly replace the judgement and trust bestowed by a human underwriter?
AI: Already Reshaping Real Estate Finance Workflows
Current global trends add fuel to this debate. The recent surge of private capital from the Gulf and Southeast Asia, coupled with fresh tech alliances between the UK and US, underline that investment in AI and quantum technologies is accelerating, not decelerating. Amidst this global backdrop, the UK’s AI ecosystem is expanding at an unprecedented speed, and its influence is already shaping the workflows of real estate finance.
Morgan Stanley’s survey projections for 2025 suggest that AI could automate up to 37% of tasks within the commercial real estate sector, including valuation, underwriting, fraud detection, and covenant tracking. The potential for efficiency gains is substantial, yet risks persist. A Bank of England study in 2024 found that whilst three-quarters of UK financial firms already implement AI, concerns over data bias, privacy issues, and reliance on third-party vendors continue. Concurrently, fears over job displacement and the risk of “invisible” deal quality, where decisions are dictated by opaque models, weigh heavily on the sector.
Transparency and Accountability Are Non-Negotiable
The Financial Conduct Authority (FCA) maintains a supportive stance, advocating for innovation that can enhance compliance and protect markets. AI holds considerable benefits in the fight against fraud, with the ability to flag suspicious activity, enhance anti-money laundering (AML) checks, and ensure Know Your Customer (KYC) requirements are consistently met. Used responsibly, AI can unearth risks that even experienced underwriters might miss. However, regulators have made it clear: transparency and accountability cannot be compromised. Lenders must ensure that AI supports decision-making without undermining fairness, governance, or the client experience.
For lenders, the promise of AI lies in its ability to scale productivity without sacrificing accuracy, enabling them to meet rising demand while remaining compliant. However, the contrast between traditional and alternative lending is stark. In high-volume banks, a “tick-box” approach aligns well with automation. By contrast, alternative lending thrives on complex scenarios such as planning risk, change of use, or intricate finance structures. These cases demand problem-solving, commercial acumen, and, crucially, a genuine ‘feel’ for the counterparty.
The Limits of AI
Algorithms excel at processing vast quantities of data at speed, but they cannot replicate the value of reputation, sector expertise, or the trust built over time. In practice, AI can accelerate due diligence by surfacing red flags faster, validating data, and aiding risk assessment. However, the “human layer” remains essential for deal origination, negotiation, and the forging of long-term partnerships.
In real estate lending, the deciding factor often extends beyond the data to include personal relationships and trust. No one lends substantial capital to an unfamiliar party without the reassurance of a trusted relationship. AI can sharpen the process, but it cannot replace the foundation of confidence and connection that underpins every successful deal.
Ultimately, the future of UK real estate lending will not be defined by technology alone. AI offers unprecedented efficiency by automating valuations, enhancing fraud detection, and accelerating underwriting, but algorithms cannot replicate the subtleties of trust, professional networks, and reputation.
Human Layer Is Key
For alternative lenders in particular, where transactions are rarely straightforward, it is the “human layer” of problem-solving, commercial instinct, and relationship-building that determines deal success. The winning formula will combine AI-driven speed with human-centred judgement.
For lenders and investors alike, the opportunity lies in deploying AI to unlock scale and accuracy, whilst preserving the personal trust that underpins every successful deal. In an increasingly automated market, the differentiator will not be the technology itself, but the people who know how to use it, without ever losing sight of the relationships that matter most.
Daniel Austin, CEO and Co-founder, ASK Partners
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