Which Lenders Consider Mortgage Arrears
The mainstream secured loan market — lenders such as Shawbrook, United Trust Bank, and Pepper Money — will typically decline applications where the first mortgage shows active arrears. The lenders most likely to consider these cases are specialists in adverse credit and complex situations. Together Money is the most widely referenced lender in this space and regularly considers cases with historic or even current arrears where the overall picture is manageable.
The number of months in arrears matters significantly. One or two months of arrears on an otherwise clean account is treated very differently from a mortgage that has been in persistent arrears for a year or that has already had court action commenced. Lenders will also look at the trend — arrears that are being actively reduced are viewed more favourably than those that are growing.
Private lenders and specialist bridging finance providers may also consider cases with arrears, particularly where there is a clear exit plan — for example, a property sale or a confirmed remortgage offer. These options carry higher rates but can provide short-term breathing space while a longer-term solution is put in place.
FCA MCOB Rules and the Pre-Action Protocol
Before any second charge lender can advance funds to a borrower in mortgage arrears, they must satisfy themselves — under MCOB — that the loan is suitable and affordable. This means assessing whether the borrower can meet both the existing mortgage (including clearing the arrears over a reasonable period) and the new second charge repayments simultaneously. A lender who does not carry out this assessment properly is in breach of FCA rules and the borrower may have grounds for a complaint or compensation claim.
The pre-action protocol for possession claims also applies to second charge mortgages. If a second charge lender seeks possession, they must demonstrate they explored reasonable alternatives first. Equally, if a first lender is already engaged in possession proceedings, a second charge lender advancing funds without full knowledge of the situation would face serious regulatory scrutiny.
The practical implication is that any second charge lender operating in the arrears space will require written evidence of the first lender's position — typically a letter confirming the arrears balance, whether a payment arrangement is in place, and whether any court proceedings have been initiated. Full disclosure is not optional; it is a regulatory requirement.
