diff --git a/routing/payment_lifecycle.go b/routing/payment_lifecycle.go
index 5c16cbf0f..b87dddef1 100644
--- a/routing/payment_lifecycle.go
+++ b/routing/payment_lifecycle.go
@@ -932,7 +932,7 @@ func (p *shardHandler) handleFailureMessage(rt *route.Route,
 	}
 
 	// Apply channel update to the channel edge policy in our db.
-	if !p.router.applyChannelUpdate(update, errSource) {
+	if !p.router.applyChannelUpdate(update) {
 		log.Debugf("Invalid channel update received: node=%v",
 			errVertex)
 	}
diff --git a/routing/router.go b/routing/router.go
index 348914db7..cf6357c68 100644
--- a/routing/router.go
+++ b/routing/router.go
@@ -2393,16 +2393,32 @@ func (r *ChannelRouter) extractChannelUpdate(
 
 // applyChannelUpdate validates a channel update and if valid, applies it to the
 // database. It returns a bool indicating whether the updates were successful.
-func (r *ChannelRouter) applyChannelUpdate(msg *lnwire.ChannelUpdate,
-	pubKey *btcec.PublicKey) bool {
-
+func (r *ChannelRouter) applyChannelUpdate(msg *lnwire.ChannelUpdate) bool {
 	ch, _, _, err := r.GetChannelByID(msg.ShortChannelID)
 	if err != nil {
 		log.Errorf("Unable to retrieve channel by id: %v", err)
 		return false
 	}
 
-	if err := ValidateChannelUpdateAnn(pubKey, ch.Capacity, msg); err != nil {
+	var pubKey *btcec.PublicKey
+
+	switch msg.ChannelFlags & lnwire.ChanUpdateDirection {
+	case 0:
+		pubKey, _ = ch.NodeKey1()
+
+	case 1:
+		pubKey, _ = ch.NodeKey2()
+	}
+
+	// Exit early if the pubkey cannot be decided.
+	if pubKey == nil {
+		log.Errorf("Unable to decide pubkey with ChannelFlags=%v",
+			msg.ChannelFlags)
+		return false
+	}
+
+	err = ValidateChannelUpdateAnn(pubKey, ch.Capacity, msg)
+	if err != nil {
 		log.Errorf("Unable to validate channel update: %v", err)
 		return false
 	}
diff --git a/routing/router_test.go b/routing/router_test.go
index 029db0c68..8c1edd253 100644
--- a/routing/router_test.go
+++ b/routing/router_test.go
@@ -385,7 +385,9 @@ func TestChannelUpdateValidation(t *testing.T) {
 		}, 2),
 	}
 
-	testGraph, err := createTestGraphFromChannels(t, true, testChannels, "a")
+	testGraph, err := createTestGraphFromChannels(
+		t, true, testChannels, "a",
+	)
 	require.NoError(t, err, "unable to create graph")
 
 	const startingBlockHeight = 101
@@ -394,13 +396,13 @@ func TestChannelUpdateValidation(t *testing.T) {
 	)
 
 	// Assert that the initially configured fee is retrieved correctly.
-	_, policy, _, err := ctx.router.GetChannelByID(
-		lnwire.NewShortChanIDFromInt(1))
+	_, e1, e2, err := ctx.router.GetChannelByID(
+		lnwire.NewShortChanIDFromInt(1),
+	)
 	require.NoError(t, err, "cannot retrieve channel")
 
-	require.Equal(t,
-		feeRate, policy.FeeProportionalMillionths, "invalid fee",
-	)
+	require.Equal(t, feeRate, e1.FeeProportionalMillionths, "invalid fee")
+	require.Equal(t, feeRate, e2.FeeProportionalMillionths, "invalid fee")
 
 	// Setup a route from source a to destination c. The route will be used
 	// in a call to SendToRoute. SendToRoute also applies channel updates,
@@ -430,10 +432,13 @@ func TestChannelUpdateValidation(t *testing.T) {
 	// returned to the sender.
 	var invalidSignature [64]byte
 	errChanUpdate := lnwire.ChannelUpdate{
-		Signature:      invalidSignature,
-		FeeRate:        500,
-		ShortChannelID: lnwire.NewShortChanIDFromInt(1),
-		Timestamp:      uint32(testTime.Add(time.Minute).Unix()),
+		Signature:       invalidSignature,
+		FeeRate:         500,
+		ShortChannelID:  lnwire.NewShortChanIDFromInt(1),
+		Timestamp:       uint32(testTime.Add(time.Minute).Unix()),
+		MessageFlags:    e2.MessageFlags,
+		ChannelFlags:    e2.ChannelFlags,
+		HtlcMaximumMsat: e2.MaxHTLC,
 	}
 
 	// We'll modify the SendToSwitch method so that it simulates a failed
@@ -459,34 +464,34 @@ func TestChannelUpdateValidation(t *testing.T) {
 	_, err = ctx.router.SendToRoute(payment, rt)
 	require.Error(t, err, "expected route to fail with channel update")
 
-	_, policy, _, err = ctx.router.GetChannelByID(
-		lnwire.NewShortChanIDFromInt(1))
+	_, e1, e2, err = ctx.router.GetChannelByID(
+		lnwire.NewShortChanIDFromInt(1),
+	)
 	require.NoError(t, err, "cannot retrieve channel")
 
-	require.Equal(t,
-		feeRate, policy.FeeProportionalMillionths,
-		"fee updated without valid signature",
-	)
+	require.Equal(t, feeRate, e1.FeeProportionalMillionths,
+		"fee updated without valid signature")
+	require.Equal(t, feeRate, e2.FeeProportionalMillionths,
+		"fee updated without valid signature")
 
 	// Next, add a signature to the channel update.
 	signErrChanUpdate(t, testGraph.privKeyMap["b"], &errChanUpdate)
 
 	// Retry the payment using the same route as before.
 	_, err = ctx.router.SendToRoute(payment, rt)
-	if err == nil {
-		t.Fatalf("expected route to fail with channel update")
-	}
+	require.Error(t, err, "expected route to fail with channel update")
 
 	// This time a valid signature was supplied and the policy change should
 	// have been applied to the graph.
-	_, policy, _, err = ctx.router.GetChannelByID(
-		lnwire.NewShortChanIDFromInt(1))
+	_, e1, e2, err = ctx.router.GetChannelByID(
+		lnwire.NewShortChanIDFromInt(1),
+	)
 	require.NoError(t, err, "cannot retrieve channel")
 
-	require.Equal(t,
-		lnwire.MilliSatoshi(500), policy.FeeProportionalMillionths,
-		"fee not updated even though signature is valid",
-	)
+	require.Equal(t, feeRate, e1.FeeProportionalMillionths,
+		"fee should not be updated")
+	require.EqualValues(t, 500, int(e2.FeeProportionalMillionths),
+		"fee not updated even though signature is valid")
 }
 
 // TestSendPaymentErrorRepeatedFeeInsufficient tests that if we receive