A landmark Court of Appeal judgment has clarified the scope of protections available under the Debt Respite Scheme, in a decision that will be of particular significance to bridging lenders and other providers of short-term secured finance.
In Forbes v Interbay and Forbes v Seculink, handed down on 6 June 2025, the Court ruled that a mortgage’s principal sum — even when demanded in full prior to a debtor entering a breathing space — does not constitute “arrears” within the meaning of the Breathing Space and Mental Health Crisis Moratorium Regulations 2020.
The decision provides welcome certainty to creditors, especially in cases involving non-amortising or interest-only loans, and clarifies the limits of debtor protections during periods of financial or mental health crisis.
At issue was whether the full amount of a mortgage loan, once called in by a lender following default, could be treated as arrears and thereby fall within the moratorium protections afforded by the Debt Respite Scheme. The borrower, Mr Forbes, argued that it could. The lenders — Interbay and Seculink — argued otherwise.
Mr Forbes had taken out a £1.3 million interest-only mortgage from Interbay, secured against his property. After he defaulted, Interbay demanded full repayment of the loan. In July 2022, Mr Forbes entered a mental health crisis moratorium. Despite this, the lender issued possession proceedings in May 2023, based on the outstanding capital.
Mr Forbes contended that the capital sum, having been demanded before the moratorium began, qualified as arrears and was therefore protected under the Regulations.
The Debt Respite Scheme provides temporary protection from enforcement action, interest, fees and charges for individuals in debt, through either a standard 60-day moratorium or an open-ended mental health crisis moratorium, subject to defined conditions. However, only certain debts qualify for protection, and the definition of “arrears” is central to its operation.
The Regulations define arrears as unpaid amounts that became due before the moratorium began, but exclude capitalised mortgage arrears. Crucially, secured debts that are not arrears are explicitly excluded from the protections afforded during a moratorium.
The Court of Appeal held that the principal sum of a mortgage loan, even when demanded in full, does not fall within the category of qualifying arrears. As such, it is not protected under the Debt Respite Scheme.
Jonathan Newman (pictured), senior partner at Brightstone Law LLP, welcomed the ruling. “The ruling provides welcome certainty for creditors, reinforcing that the moratorium scheme is not intended to restrict enforcement of secured lending beyond missed instalment payments.
“It confirms that called-in capital does not qualify as moratorium debt, resolving a point that had created considerable uncertainty in practice,” he said.
