Santander UK has updated its mortgage affordability assessment to help customers borrow more when purchasing Zero Bills homes.
Under a new partnership with Octopus Energy, Santander will remove the cost of home energy bills from its mortgage affordability assessment for Zero Bills homes, which are new build homes built to Octopus Energy's Zero Bills standard.
Launched in 2022, Octopus’ Zero Bills is an energy tariff that allows customers to move into homes ready built with energy efficiency enhancements including a heat pump, battery and solar panels with no home energy bills for at least 5-10 years, guaranteed. Octopus Energy aims to deliver 100,000 Zero Bills homes by 2030, and has already rolled out the initiative in Germany, France, New Zealand, and the UK.
The updated affordability assessment will reflect the lower household outgoings associated with Zero Bills homes and could increase the amount some customers are able to borrow. For example, customers purchasing a five-bedroom family home could potentially access up to £30,000 more compared with Santander's standard affordability assessment.
The partnership supports customers looking to purchase the most energy-efficient homes while recognising their reduction in monthly outgoings.
Santander research shows that more than half (52%) of UK adults believe that improving the energy efficiency of their home would have a significant impact on their lives. With recent energy price cap rises continuing to put pressure on household finances, eight in 10 (80%) say their main motivation for making home improvements is to reduce their energy bills, while around half (49%) want to make their home more comfortable.
Despite this appetite for change, cost remains a significant barrier. More than half (55%) of adults say the upfront cost of making energy efficiency improvements prevents them from acting.
Sean Pape, head of homes propositions at Santander UK, said: "As the first major bank to recognise the benefits of Octopus Energy's Zero Bills homes within our affordability assessment, we're helping customers make the most of lower household outgoings when buying an eligible new build home.
"By taking into account the 10-year Zero Bills guarantee from Octopus, this provides greater flexibility in the amount some customers are able to borrow, helping more people access homes that are designed to be energy efficient and more affordable to run.
"This partnership is another example of how we're evolving our mortgage offering to reflect the changing needs of homeowners and support customers who are buying energy efficient homes."
Nigel Banks, Zero Bills director at Octopus Energy, commented: “Not all homes cost the same to live in, so they shouldn't all be treated the same when it comes to mortgages. Zero Bills homes come with guaranteed no home energy bills, giving homeowners lower monthly outgoings from day one.
"This mortgage with Santander recognises that lower cost of living, helping more buyers to access cleaner, smarter homes and brings the benefits of Zero Bills living to even more people."
Ryan Jude, programme director at the Green Finance Institute, added: “The £242 billion flowing through the UK mortgage market each year is one of the most powerful levers we have to help households upgrade to warmer, more efficient homes. Santander’s enhanced affordability offer opens the door for more people to invest and upgrade with confidence building momentum behind a more innovative mortgage market. The GFI has long supported the role of enhanced affordability in the green mortgage market to support homeowners with low or no energy bills to be able to borrow more, and we are delighted to see Santander put this concept into practice.”
