An Offer Isn't a Repayment: The Cost of Getting it Wrong - Houssein and others v London Credit Ltd and others [2026] EWCA Civ 830

The recent Court of Appeal decision in Houssein and others v London Credit Ltd and others [2026] EWCA Civ 830 provides a useful reminder of the importance of understanding when a borrower’s liability for contractual interest will come to an end. The case confirms that a borrower who wants interest to stop accruing must do more than offer to repay. Unless the full amount due is immediately available after the lender requests payment, contractual interest will continue to run.

Background

The dispute arose from a £1.881 million bridging loan agreement with a term of 1 year provided by London Credit Ltd (“London Credit”) to CEK Investments Ltd (“CEK”). The loan was secured by personal guarantees and charges over residential properties. Interest was payable at 1% per month, increasing to 4% per month, compounded monthly, following an event of default. London Credit subsequently alleged that an event of default had occurred, appointed receivers over the secured properties and sought to charge default interest.

CEK disputed the alleged default and took steps to refinance the loan with another lender. It argued that interest should cease to accrue because it had made offers to repay the loan which London Credit had refused. The trial judge rejected that argument, holding that the proposals did not amount to a valid tender of repayment because they did not place the full amount immediately and unconditionally at London Credit’s disposal. CEK subsequently appealed to the Court of Appeal.

The Judgment

The Court of Appeal dismissed the appeal and confirmed that interest will ordinarily continue to accrue until repayment is received. In limited circumstances, equity may prevent further interest from accruing where a borrower has made a valid tender of the full amount due and, following refusal by the lender, continues to keep the funds immediately available for repayment. The key requirement is therefore more than a willingness or intention to pay. The borrower must be both willing and able to pay.

On the facts, CEK's proposals did not satisfy those requirements. The proposed refinancing funds were not immediately available, the arrangements remained conditional, firm redemption dates were uncertain and some proposals required London Credit to release its security without receiving full repayment. The proposals were therefore insufficient to constitute a valid tender.

The Court also considered the enforceability of the 4% per month default interest provision. Applying the principles in Cavendish Square Holding BV v Makdessi [2015] UKSC 67, the Court upheld the provision, finding that the rate was not out of all proportion to London Credit's legitimate interests. The judgment recognised that the protection of a lender's credit risk and the preservation of the borrower's ability to refinance and repay can constitute legitimate interests when assessing whether a contractual provision amounts to a penalty.

Implications

The decision reinforces the distinction between an offer to repay and a valid tender of repayment. A borrower seeking to stop interest accruing cannot simply point to a refinancing proposal or an intention to repay at some future date. The full amount properly due must be immediately available and, where payment is refused, the borrower must continue to keep those funds available to the lender. In practice, that may require clear evidence of available funds, and where appropriate, involve paying the funds into court or an escrow account.

The decision is also significant for lenders when drafting and enforcing default interest provisions. A relatively high default rate will not necessarily constitute an unenforceable penalty. The relevant question is whether the detriment imposed is out of all proportion to the lender's legitimate interests, assessed at the time the contract was entered into.

Practical Considerations:

Houssein v London Credit highlights the importance of understanding the practical consequences of refinancing and settlement negotiations. For borrowers, an apparently credible refinancing arrangement may not be sufficient to prevent substantial additional interest from accruing if the funds are not actually immediately available. For lenders, the decision provides reassurance that contractual default interest can continue to operate during a period of refinancing or dispute, provided the relevant provision is capable of being justified by legitimate commercial interests.

The case is therefore a useful reminder for anyone involved in lending and refinancing arrangements that the distinction between an intention to repay and the ability to make an immediate, unconditional repayment can have significant financial consequences. It is something that borrowers, lenders and their advisers should be mindful of when negotiating refinancing arrangements, responding to demands for repayment and considering the potential cost of allowing a dispute to continue while interest continues to accrue.

*This information is for guidance purposes only and does not constitute, and should not be regarded as, a substitute for taking legal advice that is tailored to your circumstances.

If you would like any further information or advice, please contact Jack Turkington, or another member of the Banking & Finance Team.