Mortgage principal is not an eligible debt for a mental health crisis or breathing space moratorium.
Summary
The Court of Appeal held that the sum of the mortgage principal is excluded from a mental health crisis moratorium. The definition of 'arrears' in the Debt Respite Scheme Regulations as defined in the context of a secured debt must have a different meaning to 'any sum...payable to a creditor'.
Regulation references in this summary are to the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020.
Background
In March 2025, the High Court had held that the principal sum under a mortgage agreement was not classed as arrears of a secured debt for a mental health crisis moratorium.
Forbes had argued that because the principal had been called in, it was arrears of a secured debt. The balance had fallen due for payment and remained unpaid.
Seculink had argued that the moratorium did not prevent enforcement. It argued that the proposed interpretation would mean the term of the mortgage would be extended indefinitely, and that the lender would be prohibited from claiming interest during the moratorium.
The High Court agreed with Seculink, concluding there was no clear distinction between capital sums that have been called in and those that have not. Forbes appealed.
Read the summary of Seculink v Forbes [2025] on Shelter Legal.
The Court's decision
The Court of Appeal dismissed Forbes' appeal.
Dealing with Forbes' two sets of ongoing proceedings together, the court concluded that the principal sum due under a mortgage agreement is not an eligible debt for a moratorium granted under the debt respite scheme.
The Court of Appeal decision required the Judges to determine the meaning of 'arrears' within the regulations.
Rules of statutory interpretation
The Court cited R v Secretary of State for the Home Department [2023] AC 255, which stated that the task of the Court is to seek the meaning of words which Parliament used, read in light of the legislation as a whole and in light of their context or purpose.
Bennion, Bailey and Norbury on Statutory Interpretation (8th ed.) states there is a presumption in favour of every word used by the legislator having meaning. This supported the view that ‘arrears’ as defined in the context of a secured debt must have had a different meaning to the wider ‘any sum…payable to a creditor’.
To be classed as a qualifying debt, the arrears must be the sums that the debtor has failed to pay in breach of the agreement.
The court held the definition of 'arrears' under regulation 2 must relate to unpaid periodic instalment payments.
Comparison with Insolvency Act 1986
The judgment compares the regulations with the Insolvency Act 1986, where secured debts survive bankruptcy and are not treated as a qualifying debt in a debt relief order. It notes that it would be odd if Parliament had intended such a radical departure from other insolvency law.
Enforcement of a 'mixed debt'
The Court of Appeal did not decide the point in Bluestone Mortgages Ltd v Stoute which had held that enforcement of principal and arrears was a ‘mixed debt’ and required permission of the court.
Read a summary of Bluestone Mortgages Ltd v Stoute [2025] on Shelter Legal.
Comment
This Court of Appeal judgment provides useful certainty for advisers. At the same time it highlights inconsistencies with the treatment of mortgage principal in possession proceedings, where only the Administration of Justice Act 1973 or Consumer Credit Act 1974 allow the court to treat a 'called in' principal as not yet due.
The comparison with the Insolvency Act 1986 does not take into account the radical departure in the Debt Respite Scheme regulations when dealing with enforcement of other property rights. For example, that a breathing space moratorium would prevent an eviction on Ground 8, Schedule 2 Housing Act 1988 whereas it would be unaffected by bankruptcy or a debt relief order.