Evidence, as if more were needed, that the global credit crunch is increasingly pulling on the purse-strings of the over-indebted consumer has come in the form of a newly formed secured lending business. Fair & Square — promoted as a new approach to secured lending aimed at people who want to “simplify and cut the cost of their borrowing” — has opened for business, courtesy of Barclays.

The lender says it is responding to demand from borrowers who are being hit with higher unsecured lending rates and increasing fees for re-mortgaging. Interest rates on loans that are secured against the value of your property are now generally cheaper than unsecured loans — something that has not historically been the case and can, at least in part, be attributed to the credit crunch that has sent the cost of borrowing up.

That, says Fair & Square, raises the issue: should a secured loan — a product that has generally been dismissed as being ‘lending of the last resort’ — now be on the shopping list for those looking to borrow?

“There is a growing group of people who won’t consider the current crop of secured loan providers, but want to make their finances clear and affordable,” says its general manager Steve Baker. “We have spoken to a lot of people in recent months and there is definitely a need for more choice and a real alternative to re-mortgaging. Our approach is simple: straightforward money management, high quality customer service and a competitive rate.”

Fair & Square offers a typical rate of 6.9 percent APR on loans of 10,000 to 150,000 pounds over five to 25 years, has an early repayment charge of one month’s interest and initial set-up fees of 950 pounds.

But the headline figures mask the reality of the situation. Lenders have tightened their approval criteria to such an extent that unsecured borrowing is becoming increasingly open only to those without any blemishes on their credit history: for a growing band of people, securing loans against their home is the only option. And those whose credit rating is not A1 could find themselves paying a far higher rate than Fair & Square’s “typical” 6.9 percent APR.

Unlike most personal loans, whereby money is lent at a fixed rate for the duration, this new lender’s interest rates are also variable, leaving borrowers at the mercy of fluctuations that could lead to them defaulting on the loan and risking the roof over their head.

“With more competitive rates on unsecured personal loans for those looking to borrow smaller amounts and lower rates on mortgages for the larger loans it is difficult to see, if you have got a good credit rating, who will get a good deal from a secured loan,” Andrew Hagger, head of press at price comparison site Moneyfacts.co.uk, tells Reuters.

Those with poorer credit histories, however, will certainly find it easier to obtain a secured loan. And, granted, by offering up their home as security, they might well achieve a cheaper rate than they are offered from the unsecured loans market. But, such loans should still be considered with a large dose of caution: fail to meet repayments and the lender could repossess your property — fair and square.