People the world over are reaching for ChatGPT, the artificial intelligence (AI) chatbot created by OpenAI and launched last November to general acclaim, to not only search for answers but to create new content for business, academic and leisure purposes. If you’re not familiar with ChatGPT then where have you been?! It heralds a new world of knowledge presentation and it, or tools like it, are likely to revolutionise numerous aspects of how people live and work. The beauty of this online tool is that you interact with it in a human way – simply ask it in a natural human language to answer questions or write material. You can refine its output by giving it feedback. Such AI tools are going to revolutionise our lives although we cannot yet predict to what extent this will be positive or indeed negative.
This AI tool has been trained using a supermassive data set – the entire internet perhaps? But not in a simplistic way that Google’s search tool “knows” about the internet. ChatGPT uses reinforced learning and neural networks to build an understanding of the data. While Google Search will present numerous answers to a question that it ranks in an order of “importance” that you then have to assess yourself ChatGPT will give you a single aggregation of the totality of knowledge about the subject based on its own understanding of all the source material! Of course, it is not infallible and by its own admission, you must be careful how you use its output.
Right enough background. How about an example of what ChatGPT knows? We asked it to write a 1500-word article about the current state of the UK’s secured loan market focusing on products, interest rates and key lenders and this is what it came up with:
“The UK secured loans market has undergone significant changes in recent years. The market has been affected by a range of factors, including regulatory changes, economic conditions, and shifting consumer preferences. In this article, we will explore the current state of the UK secured loans market, including the types of products available, the interest rates being offered, and the key players in the market.
Secured loans are a type of lending product that requires the borrower to put up collateral, usually in the form of a property or other asset, in order to secure the loan. These loans are typically used for larger purchases or to consolidate debts, as they allow borrowers to access larger amounts of money than they would be able to with an unsecured loan.
One of the most popular types of secured loan is a homeowner loan, which is secured against the borrower’s property. These loans are typically available to homeowners who have built up equity in their property, and the amount that can be borrowed will depend on the value of the property and the borrower’s credit history. In addition to homeowner loans, there are also secured loans available that are secured against other assets, such as a car or a savings account.
Interest rates on secured loans can vary widely depending on the lender and the borrower’s credit history. In general, however, secured loans tend to have lower interest rates than unsecured loans, as the collateral provided by the borrower reduces the lender’s risk.
Currently, interest rates on secured loans in the UK are relatively low compared to historical averages. According to data from the Bank of England, the average interest rate on a secured loan was 3.75% in January 2022. This is down from a high of 7.75% in 2008, and is significantly lower than the interest rates being offered on unsecured loans, which can range from 5% to 30% depending on the borrower’s credit history.
Despite the low interest rates, the UK secured loans market has been affected by a range of regulatory changes in recent years. One of the most significant changes was the introduction of the Mortgage Credit Directive in 2016, which introduced new rules and regulations for mortgage and secured loan lenders. These rules required lenders to conduct more thorough affordability checks on borrowers and to provide more detailed information about the cost of the loan.
In addition to regulatory changes, the UK secured loans market has also been affected by economic conditions. The COVID-19 pandemic has had a significant impact on the economy, with many people losing their jobs or seeing their income reduced. This has made it more difficult for some borrowers to access credit, as lenders have become more cautious about who they lend to.
Despite these challenges, there are still a number of lenders operating in the UK secured loans market. Some of the key players in the market include:
- Shawbrook Bank: Shawbrook is a specialist lender that provides a range of secured loan products to homeowners and other borrowers. The lender offers loans from £15,000 to £500,000, with repayment terms of up to 25 years.
- Together Money: Together Money is another specialist lender that offers secured loans to homeowners and other borrowers. The lender offers loans from £3,000 to £1 million, with repayment terms of up to 30 years.
- Paragon Bank: Paragon is a specialist lender that provides secured loans to homeowners and other borrowers. The lender offers loans from £20,000 to £500,000, with repayment terms of up to 30 years.
- Nemo Personal Finance: Nemo is a lender that provides secured loans to homeowners. The lender offers loans from £10,000 to £100,000, with repayment terms of up to 25 years.
- Precise Mortgages: Precise Mortgages is a specialist lender that provides a range of secured loan products
In recent years, the UK secured loans market has undergone a number of changes as a result of shifting consumer preferences and the emergence of new technologies. One of the key trends in the market has been the increasing use of digital technologies to streamline the application and approval process for secured loans.
A number of lenders are now offering online application processes for secured loans, which can make it faster and easier for borrowers to access credit. Some lenders are also using artificial intelligence (AI) and machine learning algorithms to assess credit risk, which can help to speed up the approval process and make it more accurate.
Another trend in the UK secured loans market is the increasing use of second charge mortgages. Second charge mortgages are a type of secured loan that allows homeowners to borrow money against the value of their property, without having to remortgage their home. These loans are often used by borrowers who have significant equity in their home and need to borrow larger amounts of money.
According to data from the Finance and Leasing Association, second charge mortgage lending in the UK grew by 12% in 2021, despite the challenges posed by the COVID-19 pandemic. This growth was driven in part by the increasing availability of digital platforms for applying for and managing secured loans, which has made it easier for borrowers to access credit.
In addition to the use of digital technologies and second charge mortgages, the UK secured loans market has also been affected by changes in consumer behavior. One of the key changes has been the increasing demand for sustainable and ethical lending products.
A number of lenders are now offering secured loans that are specifically designed to help borrowers reduce their environmental impact. These loans may be used to finance home improvements such as solar panels or energy-efficient boilers, or to purchase more sustainable vehicles or appliances. Some lenders are also offering secured loans that support charitable causes, such as donations to environmental or social justice organizations.
As well as responding to changing consumer preferences, lenders in the UK secured loans market are also facing increasing competition from alternative sources of finance. One of the most significant challengers to traditional secured lenders has been the emergence of peer-to-peer (P2P) lending platforms (e.g. Lending Works and Landbay).
P2P lending platforms allow borrowers to access funding directly from individual investors, rather than going through a traditional lender. These platforms can offer competitive interest rates and flexible repayment terms, and can be particularly attractive to borrowers who have struggled to access credit from traditional sources.
In recent years, a number of P2P lending platforms have emerged that specifically target the secured loans market. These platforms may offer secured loans that are backed by a pool of investors, or that are funded by individual investors who are looking to diversify their investment portfolios.
Despite these challenges, traditional secured lenders in the UK are still attracting significant volumes of business. According to data from the Bank of England, the total value of secured lending in the UK stood at £101.4 billion in December 2021, up from £98.4 billion in December 2020. This suggests that there is still strong demand for secured lending products, despite the challenges posed by the COVID-19 pandemic and the emergence of new sources of finance.
In conclusion, the UK secured loans market is currently undergoing significant changes as a result of shifting consumer preferences, emerging technologies, and the increasing availability of alternative sources of finance. While these changes are posing significant challenges to traditional secured lenders, there are still significant opportunities for those lenders that are able to adapt to the changing market conditions. As consumers become increasingly focused on ethical and sustainable lending products, lenders that are able to offer innovative and flexible solutions are likely to be well-positioned for success in the years to come.“
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However you might feel about this specific content there is no doubt that AI bots are about to revolutionise many forms of creativity. There are new tools to be developed around such AI that we have never thought of so expect to be continually wowed by artificial intelligence from this point forwards. We’re on the cusp of a new world for good or for bad. The genie is out of the bottle.
Amanda Gillam is Solution Loans's General Manager and has been since 2009. She is also a prolific writer on personal finance issues, and has been quoted numerous times in articles published on 3rd party websites and in press releases. Her...Read about Amanda Gillam
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