“We charge a broker's fee to customers which can be added to the loan value,” said Hill, citing a £795 flat fee.
The Exeter-based co-founder argues Secta is cheaper than other second mortgage brokers.
Hill explained: “We’re keeping it affordable by investing a lot in automation and technology. Other businesses are using a lot of people. We are only using people at the necessary touch points.”
Offering second mortgages and remortgages in the current climate could be risky. UK house price growth slowed in April, breaking its eight-month long upwards trend following the government’s stamp duty break implemented in July.
If prices continue to decline at pace in the absence of government initiatives like the stamp duty reduction, then the market could experience a housing market crash.
“You are extending equity, which means a larger amount of borrowing against the house,” said Hollingworth of Secta’s offering.
“It takes longer to pay it back, which is always a risk. And if house prices don’t keep rising, these loans could go into reverse. Parents need to think carefully before borrowing any amount. Affordability will be a huge part of that.”
ruby.hinchliffe@ft.com
