Mortgages and moratoriums: what is a qualifying debt?

16 September 2025

by Amber Turner, Barrister at Radcliffe Chambers. 

The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 ("the Regulations") came into force on 4 May 2021. Four years on, two recent judgments will be of particular interest to practitioners who grapple with the application of the Regulations in cases of secured debt. As Mellor J put it in one of those judgments (Bluestone Mortgages Ltd v Stoute 2025] EWHC 755 (Ch) ("Bluestone")), "the drafting of the Regulations leaves a lot to be desired, so guidance from Court decisions is in demand." With Bluestone and the Court of Appeal's judgment in Forbes v Seculink Ltd and Forbes v Interbay Funding Ltd 2025] EWCA Civ 690 ("Forbes") now available, at least some of that demand has been met.

The question in Forbes

The question for determination in Forbes was articulated by Sir Anthony Mann, in one of the judgments on appeal to the Court of Appeal ([2025] EWHC 524 (Ch)), as this: "whether the principal under a secured debt which has fallen due is or is not a moratorium debt" for the purpose of the Regulations. The answer to that question has clear ramifications: if the debt is a moratorium debt, then the restrictions on recovery and future interest imposed by the Regulations apply, otherwise, they do not.

The difficulty arises from the various (and parasitic) definitions used in the Regulations:

• A "moratorium debt" is "any qualifying debt" which meets the three conditions in regulation 6.
• A "qualifying debt" is "any debt or liability other than non-eligible debt": regulation 5(1).
• "Non-eligible debt" includes "secured debt which does not amount to arrears in respect of secured debt": regulation 5(4)(a) (emphasis added).
• "Arrears" means "any sum other than capitalised mortgage arrears payable to a creditor by a debtor which has fallen due and which the debtor has not paid at the date of the application for a moratorium in breach of the agreement between the creditor and debtor or in breach of the legislation or rules under which the debtor incurred the debt or liability": regulation 2(1).
• "Capitalised mortgage arrears" means "any arrears in relation to a mortgage that have been added to the outstanding balance to be paid over the duration of the mortgage": regulation 2(1).

These definitions apparently leave open the possibility that the principal amount of a secured debt (where it has fallen due, whether by passage of time or as a result of the operation of any acceleration clause) could fall within the wide definition of "arrears" and constitute "arrears in respect of secured debt", so as to fall outside the category of non-eligible debt. This was the argument pursued on behalf of the appellant debtor. If that argument were accepted, the principal would be a qualifying debt capable of being a moratorium debt, subject to the conditions in regulation 6. Consequently, even secured creditors could find themselves subject to the restrictive regime of the Regulations.

The answer in Forbes

Zacaroli LJ gave five reasons for holding that the principal sum of secured debt - whether or not called in prior to the commencement of the moratorium - is non-eligible debt, and accordingly neither a qualifying debt nor a moratorium debt. The following points in his judgment should be highlighted:

• "Arrears" naturally carries a more restricted meaning, limited to periodic instalment payments which have fallen due but remain unpaid. Even within the somewhat circular definition in regulation 2(1), Zacaroli LJ said, the word "arrears" carried its natural meaning, so that ""Arrears" in this context can only refer to unpaid instalments"" (emphasis added): see [53] of the judgment.
• The wording of regulation 5(4)(a) suggests a need to distinguish between "arrears" and that which they are "in respect of", namely the secured debt: see [58].
• The application of regulations 7(9)-(10) would create an anomaly if the appellant's construction was correct. The effect of regulation 7(9) is that, if a secured debt has not been called in prior to the commencement of the moratorium, the debtor can continue to be required to pay interest during the moratorium period. If the appellant was right, then calling the debt in the day before the moratorium commenced would prevent the creditor recovering any interest accruing in the moratorium period. This would represent a significant distinction depending only on when the debt was called in: see [59]-[61].
• Generally, it was not clear that the Regulations were intended to create a significant interference with the rights of secured creditors or depart so radically from their treatment in other personal insolvency contexts such as bankruptcies and IVAs: see [62]-[64].

As acknowledged by Zacaroli LJ, the reference to "arrears" in regulation 5(4)(a) and the associated definitions in regulation 2(1) are "at the very least ambiguous". Indeed, the opposite conclusion to the one reached by Zacaroli LJ had found favour with HHJ Monty KC in West One Loan Limited v Salih (unreported, 30 March 2022) at [47]-[50], albeit that the point does not appear to have been contested before him.

While this particular ambiguity within the Regulations has been resolved by the Court of Appeal, it will be seen by turning to Bluestone, mentioned briefly in Forbes, that the clear-cut division offered by Forbes may have limited impact. This is because, although there is now a bright line between the principal sum (non-eligible debt) and arrears of instalments (qualifying debt), many secured debt cases involve a mixture of both. The question for Mellor J in Bluestone was how the Regulations apply in these circumstances.

Bluestone

Under regulation 7, a creditor may not take any enforcement action in respect of a moratorium debt during a moratorium period, unless the Regulations provide otherwise or the court gives permission. Enforcing a judgment or order which relates wholly to a moratorium debt or security which is held solely in respect of a moratorium debt is "enforcement action" for this purpose. However, as Mellor J asked (and answered): "[What] is the position where the judgment or order relates only in part to a moratorium debt (a "mixed judgment"), or the security secures both moratorium debt and other debt ("mixed security")?"

Again, the definitions in the Regulations are at the heart of the debate. Regulation 7(7) provides: "A creditor or agent takes enforcement action if they take any of the following steps in relation to a moratorium debt". Two steps are relevant to this question:

• Regulation 7(7)(b): "take a step to enforce a judgment or order issued by a court or tribunal before or during a moratorium period regarding a moratorium debt".
• Regulation 7(7)(c): "enforce security held in respect of a moratorium debt".

In Bluestone, the creditor had obtained a possession order and a money judgment for both the principal sum and arrears. HHJ Parker held at first instance that, although the majority of the debt which the creditor was seeking to enforce was not a moratorium debt (not relating to arrears), the Regulations nonetheless prevented the creditor from enforcing the possession order without the court's permission. On appeal, Mellor J agreed.

In particular, Mellor J found that a purposive interpretation of regulation 7 supported the conclusion that "regarding" and "in respect of" ought to be given their natural, wider meaning. Considering the facts of the case, which involved a mental health crisis moratorium, Mellor J noted "there are very few events which could be more detrimental to the debtor's mental health" than eviction from and sale of the debtor's family home, which would follow if the creditor were able to enforce the larger non-eligible debt automatically.

It was argued before HHJ Parker that the conclusion upheld by Mellor J "would mean that every mortgage possession order based on arrears would be affected by a moratorium." HHJ Parker expressly agreed and was not deterred. A further point made before HHJ Parker was that this conclusion would undermine the carve-out for secured debts in regulation 5(4)(a). This was not accepted by the judge, who noted that a secured creditor could continue to claim fees, penalties and charges accruing during a moratorium period. A similar point was dismissed by Mellor J as taking too narrow a view of the purpose of the Regulations.

Conclusion

The blow to debtors and boon to creditors dealt by Forbes is therefore tempered by Bluestone. Advisors of secured creditors should take note of the endorsement in both cases of the right to continue accruing interest and other charges during the moratorium period, while bearing in mind the consequences of Bluestone for cases involving mixed judgments or security. On the other hand, representatives of debtors may take heart from Bluestone and, in particular, the purposive interpretation favoured by Mellor J. As to that, although it did not persuade Zacaroli LJ to side with the appellant in Forbes, he noted that the Regulations' purpose "is to provide protection to vulnerable debtors against creditors who are most likely to be commercial entities." That is something for all parties to bear in mind if further questions of interpretation of the Regulations arise.