First-time buyers begin their search long before they ever speak to a mortgage broker or mortgage lender.
That search might start with a browse on Rightmove or a peek in the local estate agents’ window before moving on to more practical questions. They may be reading forums and news articles to find out how much deposit they need, or what loan-to-value means, or the difference between a fixed-rate and tracker mortgage.
Whereas historically those questions may have been typed into a search engine or discussed with friends and family, these days first-time buyers may start a digital conversation with their preferred AI tool.
It makes sense; they can ask more intuitive questions tailored to them – for example, they might ask for advice on whether they can afford to buy or whether their credit history will hold them back.
AI can explain the house-buying process.
Buying a first home is exciting, but if someone has never been through the process, the terminology can feel overwhelming and create an invisible barrier they didn’t realise they needed to overcome. All of a sudden, people are expected to understand what mortgage terms, affordability checks, product fees, credit scoring, interest rates, conveyancing, surveys, and insurance all mean.
In this context, the use of AI chat tools can feel like a welcome relief.
It explains things quickly, and it does not care how basic the question is or how many times you’re asking it to re-explain what something means. It’s also available at any time of day, so whether a first-time buyer is searching on their lunch break or in the middle of the night, they can get the help they need.
These tools are valuable because they allow individuals to gain information about their mortgage options before starting any formal discussions with brokers, lenders, estate agents or solicitors.
AI is best treated as a learning tool, not an adviser
As technology improves, first-time buyers are starting to question why they should use a mortgage broker instead of AI to find the right deal.
There is a huge difference between using AI to understand mortgages and using AI to choose a mortgage.
The first scenario is incredibly useful.
The second exposes individuals to much greater risk and could lead to inaccurate advice.
For first-time buyers, AI should be used as a learning tool to help explain what to expect along the house-buying journey. It can explain why lenders look at income and spending and describe how product fees work. It can explain why mortgage rates change and why monthly repayments are not the only cost to consider when assessing affordability. If an individual has an appointment booked with a broker or lender, AI can help them prepare for that first meeting by giving a steer on what questions to expect or ask.
Being prepared for the meeting with a broker or lender means the potential buyer is likely to have a better initial conversation. Instead of sitting through an appointment feeling embarrassed or overwhelmed by their choices, they can ask clearer questions about affordability, risk, flexibility and timing. They may understand enough to question whether the cheapest headline rate is actually the most cost-effective option once fees, term length, and plans are factored in.
But the usefulness of AI becomes more limited when the question changes from “what does this mean?” to “what should I do?”
Mortgage advice always needs to be personalised.
One limitation of using AI to find a mortgage is that it can only work with the information it’s given. And first-time buyers are unlikely to know which details are important to mention.
For example, someone with a permanent job, a strong credit history, and a straightforward deposit may need a very different conversation from someone self-employed, has recently changed careers, is using a gifted deposit, or has a history of poor credit.
And surprisingly, the mortgage itself is only one part of the decision that first-time buyers need to make.
When taking out a mortgage for the first time, buyers need to think about their future. They need to ask themselves: how long will they stay in the property? Is their income likely to change, or are they planning on starting a family in the near future? The answer to these questions can start to change how comfortable they are with spending each month on repayments. That kind of conversation is difficult to reduce to a series of prompts because those discussions involve judgement, context and responsibility.
If an individual asks AI to find them the cheapest monthly mortgage, they may get an answer focused on price.
But that doesn’t always mean it’s the right product for them.
Finding the right mortgage involves many regulatory issues.
In the UK, advising on mortgage contracts is a regulated activity because it involves advising a borrower or potential borrower on the merits of entering into a particular contract. This is regulated by the Financial Conduct Authority, which is responsible for making sure that those who are assessing suitability must obtain necessary information to make a suitable recommendation, including their financial situation, objectives and risk profile.
An AI tool is not subject to this same level of scrutiny.
We all know the risks of AI hallucinations, and AI tools will provide confident answers that may present options that feel tailored to the user. But those responses may not be relevant to the UK or may not reflect a lender’s terms and conditions. While the tool can compare different mortgage types and suggest pros and cons, the output shouldn’t be treated as financial advice.
AI lacks accountability in mortgage recommendations.
As noted earlier, AI can only work within the confines of the initial prompts and previous conversations. If the output is poor, then the buyer may be misinformed and could base their decision on incorrect information. If the tool suggests an unsuitable course of action, there may be no responsibility behind that suggestion, which could put buyers at risk of making an expensive mistake.
That’s why individuals should still rely on human support and guidance to find the right mortgage for their needs.
Brokers and lenders are accountable for the recommendations they make.
They have to demonstrate that potential buyers understand the implications of taking out a mortgage, and that every conversation and piece of paperwork backs up the professional judgement and responsibility. They also have to demonstrate that any confidential financial documents, such as bank statements, tax returns, and personal identification, are kept safe and secure and in line with data protection regulations.
No one should ever enter personal financial information into a public chat tool – even if they have a paid-for account.
It is one thing to ask ChatGPT “what is a mortgage agreement in principle?” It is another to upload bank statements or type in detailed personal data in the hope of receiving a tailored answer.
It’s safe to use AI for general mortgage education, but a qualified professional should be the one to give advice.
Taking out a mortgage for the first time is a big decision. Potential buyers deserve full confidence and reassurance that they are making the right choice in one of the biggest financial decisions of their lives.
AI is a highly valuable tool for helping potential buyers understand the house-buying process and explain mortgage terminology.
It should be used to create a list of useful questions to ask a mortgage broker or lender.
It can also help individuals determine which documents they might need to provide to a lender as part of an application.
But that’s where the support should end, and qualified help and advice begin.
All information gleaned from AI chats should be shared with a regulated professional who can take over, consider the wider context, and help identify the most appropriate mortgage product.
Conclusion
It’s unrealistic to expect first-time buyers not to use AI during the initial stages of their house-buying journey. AI is becoming just as influential as search engines for finding information, but it’s important to understand how to use it carefully so it’s there to educate, not make decisions for you.
A mortgage is not just a rate, a term or a monthly repayment. It is a long-term financial commitment secured against your home.
The right choice of mortgage is far more nuanced than the choice of available interest rate. Decisions should be based on a potential buyer’s current earnings, potential earnings, future plans, and how much uncertainty they can live with. That’s why professional judgement and qualified advice from a regulated broker or lender is so important.
Should first-time buyers use AI to help them find a mortgage?
Yes, if they want to understand more about how mortgages work.
No, if they want it to choose a mortgage for them.
