AI is now a core driver of transformation in financial services, reshaping the foundations of real estate lending. Over 85% of UK lenders now deploy AI tools to streamline operations and improve decision-making, according to AllAboutAI.com. For a sector long criticised for rigid risk models and slow processes, this is transformative.
Yet, in the alternative lending sector, which has grown to account for 41% of the UK market by offering flexibility and a relationship-led approach, a key question arises: can algorithms ever truly replace the judgement and trust of a human underwriter?
Global momentum is currently adding weight to the debate. Massive injections of private capital from the Gulf and Southeast Asia, alongside new UK-US tech alliances, show that investment in AI and quantum technologies is accelerating, not slowing. Against this backdrop, the UK’s AI ecosystem is expanding rapidly, and its influence is already reshaping real estate finance workflows.
Morgan Stanley’s 2025 survey forecasts that AI could automate up to 37% of tasks in commercial real estate, spanning valuation, underwriting, fraud detection, and covenant tracking. The efficiency gains are significant, but risks remain. A 2024 Bank of England study found that while three-quarters of UK financial firms already use AI, concerns over data bias, privacy, and reliance on third-party vendors persist. At the same time, fears of job displacement and the possibility of “invisible” deal quality, where decisions are made by opaque models, weigh heavily on the sector.
The FCA, however, has taken a supportive stance, encouraging innovation where it can enhance compliance and protect markets. From a fraud perspective, the benefits are substantial: AI can flag suspicious activity, strengthen anti-money laundering (AML) checks, and ensure KYC requirements are consistently met.
Used responsibly, AI can uncover risks that even experienced underwriters might overlook. But regulators are clear: transparency and accountability are non-negotiable. Lenders must ensure that AI augments decision-making without undermining fairness, governance, or the client experience.
For lenders, AI’s promise lies in scaling productivity without sacrificing accuracy, enabling them to meet rising demand while staying compliant. Yet 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.
This is where the limits of AI become clear. Algorithms can crunch numbers at speed, but they cannot replicate the value of reputation, sector expertise, or the trust built across the table. In practice, AI can accelerate due diligence: surfacing red flags faster, validating data, and supporting risk assessment, but the “human layer” remains vital for deal origination, negotiation, and long-term partnerships.
In real estate lending, the deciding factor is often not just the data, but who you know and who trusts you. 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 promises unprecedented efficiency: automating valuations, enhancing fraud detection, and accelerating underwriting, but algorithms cannot replicate the nuance of trust, networks, and reputation. For alternative lenders, especially, 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 be AI-driven speed combined with human-centred judgement. For lenders and investors alike, the opportunity lies in deploying AI to unlock scale and accuracy, while safeguarding the personal trust that underpins every successful deal. In an increasingly automated market, the differentiator won’t be the technology itself, but the people who know how to use it, without ever losing sight of the relationships that matter most.
