Falling behind on mortgage payments can quickly become stressful, particularly when you are trying to agree a payment arrangement with your lender and the lender does not accept the amount you believe you can afford.

A common question is: can a mortgage lender refuse to accept a payment arrangement in the UK?

The short answer is that a lender does not necessarily have to accept every payment proposal made by a borrower. However, where a borrower is experiencing payment difficulties, mortgage lenders are subject to regulatory requirements concerning fair treatment, forbearance and reasonable attempts to reach an agreement.

This means that a lender should not simply disregard a realistic and affordable proposal without properly considering the borrower’s circumstances.

The important issue is therefore not simply whether a lender can say “no”. The question is whether the lender has properly considered the circumstances, affordability and available alternatives before deciding what action to take.

What Is a Mortgage Payment Arrangement?

A mortgage payment arrangement is an agreement between a borrower and lender concerning how outstanding mortgage payments or arrears will be dealt with.

The arrangement may involve the borrower continuing to make the normal monthly payment while paying an additional amount towards the arrears. In other circumstances, the lender may agree to a temporary reduction in payments, a change to the payment date, an extension of the mortgage term or another form of forbearance.

The appropriate arrangement will depend on the borrower’s circumstances and the lender’s assessment.

The objective should generally be to establish a payment arrangement that the borrower can realistically maintain rather than agreeing to an amount that appears attractive initially but becomes unaffordable within a few months.

This is particularly important because an unsustainable arrangement can result in further missed payments and increasing arrears.

Can a Mortgage Lender Refuse a Payment Arrangement?

A mortgage lender can refuse a particular proposal.

There is no general rule that says a borrower can choose any monthly repayment amount and require the lender to accept it.

However, this does not mean that a lender can ignore a borrower’s circumstances or refuse to engage with reasonable proposals.

The FCA’s current rules require firms dealing with customers who have payment difficulties to treat them fairly. For regulated mortgages, MCOB 13.3.2A requires lenders to make reasonable efforts to reach agreement with the customer over how a payment shortfall will be repaid. It also requires lenders to consider, where appropriate, an alternative to taking possession of the property and to allow a reasonable period for repayment.

The same rules say that, where feasible, the lender should establish a payment plan that is practical in the circumstances of the customer.

Therefore, a refusal does not automatically mean that the lender has acted improperly. The circumstances surrounding the refusal matter.

Why Might a Lender Reject Your Proposed Payment?

One of the most common reasons is that the proposed payment may not be sufficient to deal with the arrears within a reasonable period.

For example, suppose a borrower has accumulated £15,000 of mortgage arrears and proposes to pay an additional £50 per month. Depending on the interest, charges, mortgage terms and wider circumstances, the lender may consider that proposal inadequate.

The lender may therefore ask for further information or propose a different arrangement.

Another possibility is that the lender believes the borrower’s financial circumstances have changed and that the proposed arrangement is no longer appropriate.

A lender may also reject a proposal where the information provided does not allow it to properly assess affordability.

This is why providing clear and accurate income and expenditure information can be important when negotiating mortgage arrears.

Under FCA rules concerning repayment arrangements, firms must take reasonable steps to ensure that arrangements are sustainable. Where income and expenditure is assessed, the assessment must be objective and based on sufficiently detailed information.

What Does “Affordable” Mean to a Mortgage Lender?

Affordability is not simply a question of how much money is left in a bank account at the end of the month.

A lender may consider income, household expenditure, other debts, essential living costs and the circumstances that caused the payment difficulties.

The purpose is to establish whether the proposed arrangement can actually be maintained.

For example, a borrower may offer £1,000 per month towards mortgage arrears because they believe this would resolve the arrears quickly. However, if paying £1,000 means they cannot afford council tax, utilities, food or other essential expenditure, the arrangement may not be sustainable.

The FCA specifically recognises that an arrangement is unlikely to be sustainable if it prevents a customer from meeting priority debts and essential living expenses.

This is why agreeing to a payment amount simply because the lender asks for it can sometimes create a bigger problem later.

What If the Lender Says Your Offer Is Too Low?

If your lender says that the amount you have offered is insufficient, ask the lender to explain why.

You can ask what payment they believe is required and how that figure has been calculated.

It is also sensible to provide an updated income and expenditure statement if your circumstances have changed.

Do not simply promise to pay an amount that you know you cannot maintain.

A payment arrangement that lasts for one or two months before failing may put you in a worse position than a carefully calculated arrangement that is realistic over a longer period.

The FCA rules recognise several forms of forbearance, including allowing arrears to be deferred where immediate repayment would create an unsustainable payment level, accepting reduced or token payments for a reasonable period in appropriate circumstances, and agreeing a repayment arrangement that allows a reasonable period for the debt to be repaid.

Can a Lender Refuse to Negotiate?

A lender is not required to accept every proposal.

However, the regulatory framework does require appropriate engagement with borrowers experiencing payment difficulties.

For regulated mortgages, MCOB 13.3.2A states that lenders must make reasonable efforts to reach agreement concerning repayment of a payment shortfall. It also states that, where feasible, a practical payment plan should be established.

The wider FCA rules also require firms dealing with customers in or approaching arrears to treat them with forbearance and due consideration and to take account of their individual circumstances.

This is important because there is a difference between a lender saying:

“We have considered your proposal but cannot accept £X because…”

and a lender simply refusing to discuss any repayment proposal.

The precise circumstances would need to be considered before deciding whether a lender’s conduct is reasonable or compliant with its obligations.

What If the Lender Wants the Full Arrears Immediately?

A borrower in arrears may be asked to clear the arrears in a relatively short period.

That does not necessarily mean the borrower has to agree immediately.

If paying the entire arrears would make the borrower’s ongoing mortgage payments unsustainable, it may be appropriate to ask the lender to consider an alternative arrangement.

The FCA rules expressly recognise circumstances in which immediate repayment of arrears could increase payments to an unsustainable level. They also recognise the possibility of allowing arrears to be deferred or agreeing a repayment arrangement over a reasonable period.

This does not mean that arrears disappear. Interest and charges may continue depending on the circumstances and terms of the arrangement.

It means that the method and timing of repayment should be considered in light of the borrower’s circumstances.

What Payment Arrangements Might Be Considered?

There is no single payment arrangement that works for every borrower.

Depending on the circumstances, possibilities may include paying the normal monthly mortgage payment plus an agreed amount towards the arrears.

Another possibility may be a temporary reduction in payments, followed by a return to normal payments once the financial difficulty has passed.

In some cases, the lender may consider extending the mortgage term or changing the way payments are structured.

MoneyHelper explains that borrowers should contact their lender as soon as possible and that lenders must make reasonable attempts to reach an agreement, including considering changes to how and when payments are made.

The important point is that the arrangement should be based on the borrower’s actual financial position rather than an amount that cannot realistically be maintained.

What Happens If You Break the Payment Arrangement?

A payment arrangement is not a permanent protection against further action.

If the borrower agrees to an arrangement and then misses the agreed payments, the lender may review the situation.

The lender may ask for updated financial information, seek a revised arrangement or take further steps depending on the seriousness of the arrears and the stage reached.

This is why borrowers should contact the lender promptly if they know they will not be able to meet an agreed payment.

Ignoring the problem can make the situation considerably more difficult.

If the mortgage is already significantly behind, you should also understand where you are in the wider repossession process. Our guide to the mortgage repossession process in the UK explains how the process can develop from arrears through to court proceedings and possession.

Can Refusal of a Payment Arrangement Lead to Repossession?

It can form part of the circumstances that eventually lead towards possession proceedings, but repossession should not simply be treated as the automatic consequence of a lender refusing one particular proposal.

For regulated mortgages, the FCA’s MCOB rules require lenders to make reasonable efforts to reach an agreement over repayment of payment shortfalls and, where appropriate, consider alternatives to possession. They also state that a lender should not repossess unless all other reasonable attempts to resolve the position have failed.

MoneyHelper similarly explains that lenders should only start court action as a last resort after considering alternatives to help the borrower remain in their home.

This is why it is important to engage with the lender rather than simply stop communicating.

What Should You Do If Your Lender Refuses Your Proposal?

Start by asking the lender to explain the reason for the refusal.

Keep a written record of the proposal you made, the amount offered, the information you supplied and the lender’s response.

If you believe the proposed payment is genuinely affordable, prepare a clear income and expenditure assessment showing how you arrived at the figure.

It can also help to explain whether your financial difficulty is temporary or likely to continue.

For example, a temporary loss of income may require a different solution from a permanent reduction in household income.

If your circumstances have changed since your original proposal, provide updated information rather than continuing to rely on an old affordability assessment.

MoneyHelper advises borrowers to contact their lender as soon as they believe they may have difficulty making a payment and to offer what they can realistically afford.

What If You Are Already Facing Repossession?

The position becomes more urgent once court proceedings have started.

At that stage, simply making a new payment proposal may not resolve everything immediately. The borrower needs to understand the current stage of the proceedings, the arrears, the lender’s position and what evidence is available to demonstrate affordability.

If you are already dealing with missed payments, our existing guide on how many mortgage payments you can miss before repossession in the UK explains why borrowers should not assume that there is a fixed number of missed payments before action can begin.

The circumstances of each case can be different.

Should You Keep Paying Something If the Lender Rejects Your Proposal?

If you are able to make a payment, you should carefully consider your position and obtain appropriate advice rather than assuming that paying nothing is the best option.

MoneyHelper notes that continuing to pay what you can afford is generally preferable to paying nothing, because it can help reduce arrears.

However, you should not make promises that you cannot keep.

If you offer an amount, it should be based on a realistic assessment of your finances.

The aim should be to establish a sustainable position and communicate that position clearly to the lender.

Keep Evidence of Everything

When dealing with mortgage arrears, documentation can become extremely important.

Keep copies of emails, letters, income and expenditure assessments, payment proposals, lender responses and records of telephone conversations.

If you speak to the lender by telephone, make a note of the date, time, department, name of the person you spoke to and the substance of the conversation.

If the lender rejects a proposal, keep the written explanation.

If the matter later progresses towards court proceedings, a clear record of what you proposed and how the lender responded may help demonstrate the history of attempts to resolve the arrears.

A Payment Arrangement Should Be Realistic

The most important point is that a payment arrangement should be sustainable.

A borrower should not agree to an amount simply because they are worried about repossession.

At the same time, a lender does not have to accept an unrealistic proposal merely because the borrower says it is affordable.

The FCA framework focuses on fair treatment, individual circumstances, reasonable efforts to reach agreement and sustainable arrangements.

The best approach is therefore usually to establish the actual financial position, make a realistic proposal, provide supporting information and keep a clear written record of the discussions.

Final Thoughts

So, can a mortgage lender refuse to accept a payment arrangement in the UK?

Yes, a lender can refuse a particular proposal where it has legitimate reasons for doing so. However, that does not mean a lender can simply ignore a borrower who is experiencing payment difficulties or refuse to properly consider reasonable alternatives.

For regulated mortgages, lenders have obligations to deal fairly with customers experiencing payment difficulties and to make reasonable efforts to reach agreement over repayment of payment shortfalls. Where feasible, the FCA rules specifically contemplate practical payment plans and alternatives to possession.

If you are struggling with mortgage arrears, the earlier you understand your financial position and communicate with your lender, the more opportunity there may be to explore a workable solution.

Immediate Bank Claims provides independent support and assistance concerning mortgage arrears, repossession and related property problems. The business is not a firm of solicitors or barristers, and information on this website is provided for general information rather than as legal or financial advice.

If you are already facing serious arrears or repossession action, consider obtaining appropriate independent professional advice about your individual circumstances.

Disclaimer

Immediate Bank Claims is not a firm of solicitors or barristers. We provide independent support, guidance and assistance relating to mortgage arrears, property repossession, LPA receivers, debt matters and related property issues.

The information provided in this article is for general information purposes only and should not be treated as legal, financial or professional advice. Every situation is different, and the application of laws, regulations and procedures will depend on the individual circumstances of each case.

If you are experiencing mortgage arrears, facing repossession proceedings or dealing with a dispute with your lender, you should consider obtaining appropriate independent professional advice regarding your specific circumstances.

This article was correct at the time of publication but should not be relied upon as a substitute for advice on your individual situation.