diff --git a/tests/test_lnpeer.py b/tests/test_lnpeer.py
index 9d9ddc699..db38087ba 100644
--- a/tests/test_lnpeer.py
+++ b/tests/test_lnpeer.py
@@ -104,11 +104,13 @@ class MockNetwork:
 
 
 class MockBlockchain:
-
-    def height(self):
+    def __init__(self):
         # Let's return a non-zero, realistic height.
         # 0 might hide relative vs abs locktime confusion bugs.
-        return 600_000
+        self._height = 600_000
+
+    def height(self):
+       return self._height
 
     def is_tip_stale(self):
         return False
@@ -1807,6 +1809,83 @@ class TestPeerDirect(TestPeer):
             await f()
         self.assertTrue(isinstance(failing_task.exception().__cause__, lnmsg.UnexpectedEndOfStream))
 
+    async def test_hold_invoice_set_doesnt_get_expired(self):
+        """
+        Alice pays a hold invoice from Bob, Bob doesn't release preimage. Verify that Bob doesn't
+        expire the htlc set MIN_FINAL_CLTV_DELTA_ACCEPTED blocks before htlc.cltv_abs (as we would do with normal htlc sets).
+        The htlc set should only get failed if the user of the hold invoice callback explicitly removes the
+        callback (e.g. after refunding and failing a swap), otherwise it should get timed out onchain (force-close).
+
+        This only tests hold invoice logic for hold invoices registered with `LNWallet.register_hold_invoice()`,
+        as used e.g. by submarine swaps. It doesn't cover the hold invoices created by the hold invoice CLI
+        which behave differently and use the persisted `LNWallet.dont_expire_htlcs` dict.
+        """
+        async def run_test(test_trampoline):
+            alice_channel, bob_channel = create_test_channels()
+            alice_p, bob_p, alice_w, bob_w, _q1, _q2 = self.prepare_peers(alice_channel, bob_channel)
+
+            lnaddr, pay_req = self.prepare_invoice(bob_w, min_final_cltv_delta=150)
+            del bob_w._preimages[pay_req.rhash]  # del preimage so bob doesn't settle
+            payment_key = bob_w._get_payment_key(lnaddr.paymenthash).hex()
+
+            cb_got_called = False
+            async def cb(_payment_hash):
+                self.logger.debug(f"hold invoice callback called. {bob_w.network.get_local_height()=}")
+                nonlocal cb_got_called
+                cb_got_called = True
+
+            bob_w.register_hold_invoice(lnaddr.paymenthash, cb)
+
+            async def check_mpp_state():
+                async def wait_for_resolution():
+                    while True:
+                        await asyncio.sleep(0.1)
+                        if payment_key not in bob_w.received_mpp_htlcs:
+                            continue
+                        if not bob_w.received_mpp_htlcs[payment_key].resolution == RecvMPPResolution.SETTLING:
+                            continue
+                        return
+                await util.wait_for2(wait_for_resolution(), timeout=2)
+                assert cb_got_called
+                mpp_set = bob_w.received_mpp_htlcs[payment_key]
+                self.assertEqual(mpp_set.resolution, RecvMPPResolution.SETTLING, msg=mpp_set.resolution)
+                self.assertEqual(len(mpp_set.htlcs), 1, f"should get only one htlc: {mpp_set.htlcs=}")
+                left_to_expiry = next(iter(mpp_set.htlcs)).htlc.cltv_abs - bob_w.network.get_local_height()
+                # now mine up to one block after the expiry
+                bob_w.network._blockchain._height += left_to_expiry + 1
+                await asyncio.sleep(0.2)
+                # bob still has the mpp set and it is not failed
+                # it should only get removed once the channel is redeemed
+                self.assertIn(bob_w.received_mpp_htlcs[payment_key].resolution, (RecvMPPResolution.COMPLETE, RecvMPPResolution.SETTLING))
+                # now also check that the mpp set will get set failed if the hold invoice
+                # is being explicitly unregistered, and we don't have a preimage to settle it
+                bob_w.unregister_hold_invoice(lnaddr.paymenthash)
+                self.assertEqual(bob_w.received_mpp_htlcs[payment_key].resolution, RecvMPPResolution.FAILED)
+                raise SuccessfulTest()
+
+            if test_trampoline:
+                await self._activate_trampoline(alice_w)
+                # declare bob as trampoline node
+                electrum.trampoline._TRAMPOLINE_NODES_UNITTESTS = {
+                    'bob': LNPeerAddr(host="127.0.0.1", port=9735, pubkey=bob_w.node_keypair.pubkey),
+                }
+
+            async def f():
+                async with OldTaskGroup() as group:
+                    await group.spawn(alice_p._message_loop())
+                    await group.spawn(alice_p.htlc_switch())
+                    await group.spawn(bob_p._message_loop())
+                    await group.spawn(bob_p.htlc_switch())
+                    await asyncio.sleep(0.01)
+                    await group.spawn(alice_w.pay_invoice(pay_req))
+                    await group.spawn(check_mpp_state())
+
+            with self.assertRaises(SuccessfulTest):
+                await f()
+
+        for _test_trampoline in [False, True]:
+            await run_test(_test_trampoline)
+
 
 class TestPeerForwarding(TestPeer):