The Court of Appeal considered on 1 July 2026 what a borrower under a secured loan must do, short of repayment, to stop interest running, and whether a default interest rate was a penalty.
Key facts
- Who: Borrowers under secured loans, and the lenders that hold security over their property
- From: 1 July 2026 (judgment date)
- Source: Nuray Houssein & Ors v London Credit Limited & Anor [2026] EWCA Civ 830
Background
The Court of Appeal (Civil Division) handed down judgment on 1 July 2026 in Nuray Houssein & Ors v London Credit Limited & Anor [2026] EWCA Civ 830. Lord Justice Lewison gave the judgment. Lord Justice Newey and Lord Justice Arnold also sat. The appeal came from a decision of a deputy judge of the Chancery Division, [2025] EWHC 2749 (Ch).
Ali Houssein had built up a portfolio of residential properties, including the family home and five buy-to-let properties. In 2020 a bridging loan secured on some of them needed refinancing. London Credit Limited (LCL) made a loan of £1.881 million to CEK Investments Ltd, a company owned by Mr and Mrs Houssein, who were also its directors. They gave personal guarantees, and charges were taken over the buy-to-let properties and the family home.
LCL was an unregulated moneylender. The loan was made to the company, and the facility letter said the borrower was not to reside at any secured property. The judge found that using a company as borrower was not a sham.
The case had been to court before. After a first trial in 2023 the judge held that the default interest rate was a penalty. In June 2024 the Court of Appeal ([2024] EWCA Civ 721) held he had taken the wrong approach and sent the question back to him.
The questions
The appeal raised three issues:
1. What must a borrower do, short of actual repayment, to stop interest running? 2. Was the default interest rate in the loan documents a penalty? 3. If it was, is the lender still entitled to statutory interest on the debt?
At the remitted hearing the borrowers denied liability for interest on the ground that LCL had failed to accept offers of repayment. The judge held that they had not done enough to stop interest running. He also held that the default rate was not out of all proportion to the lender's legitimate interests and so was not a penalty. The third question did not arise.
The reasoning on stopping interest
The judgment reviews long-standing authority. In Shearer v Spring Capital Ltd [2013] EWHC 3148 (Ch) it was put this way: for a tender to be valid, the money must not just be tendered but set aside so that it is, in an effective way, treated as the lender's money to be had on demand. Earlier cases distinguish a tender from an offer to repay, even where the offers were reasonable.
The borrowers argued that these principles needed modifying where a loan is to be discharged by refinancing, because a new lender will not release funds until the old lender discharges the security. They said that where a borrower offers to repay in full, has an offer of new finance capable of acceptance, and the lender refuses, interest should end from the date redemption would have taken place, even if the funds are no longer available.
The judgment considers earlier refinancing cases. In Barratt v Gough-Thomas [1951] 2 All ER 48 the lender was held entitled to interest until actual repayment, because there was no evidence that money had been set aside and was available for payment.
What this means for borrowers
- The authorities discussed in the judgment draw a line between an offer to repay and a tender where the money is set aside and available to the lender.
- The default rate here was tested against whether it was out of all proportion to the lender's legitimate interests, the test the judge applied.
- Borrowers who think a refused offer to repay has stopped interest running should get advice and check their documents and the loan terms.
Sources
- Nuray Houssein & Ors v London Credit Limited & Anor [2026] EWCA Civ 830, Court of Appeal (Civil Division), 1 July 2026: https://caselaw.nationalarchives.gov.uk/ewca/civ/2026/830