The change means buyers who buy one of these homes can borrow up to an additional £30,000.
Zero Bills from Octopus is an energy rate that applies to homes that are ready-built with energy efficiency improvements such as heat pumps, batteries and solar panels.
Customers who move to these new-build homes are guaranteed no energy bills for their home for at least five to ten years.
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
Santander has recognized the reduction in bills this will bring to buyers of these properties and has implemented the affordability enhancement.
The updated affordability assessment will reflect lower household spending associated with Zero Bills homes and could increase the amount some customers can borrow.
For example, customers buying a five-bedroom family home could potentially get up to £30,000 more compared to Santander’s standard affordability assessment.
Sean Pape, head of housing propositions at Santander UK, said: “As the first major bank to recognize the benefits of Octopus Energy’s Zero Bills homes within our affordability assessment, we are helping customers make the most of reduced household expenses when buying a qualifying new-build home.
“By taking into account Octopus’ 10-year Zero Bills Guarantee, this provides greater flexibility in the amount some customers can borrow, giving more people access to homes that are designed to be energy efficient and more affordable to run.”
What is the opinion of the experts about the plan? What to consider
Mortgage brokers have applauded Santander’s efforts in supporting both improving affordability and encouraging sustainable homes. But there are concerns that the limited supply of these types of homes makes mortgages less accessible.
Matt Coulson, founder of Rickmansworth-based Heron FinancialSpeaking to the Newspage Agency, said: “Credit to Santander and Octopus for this, and I mean it. Recognizing that a home with no energy bills is cheaper to run, and making that count towards what someone can borrow, is exactly the right principle.”
He added: “The only real catch is range. It applies to new build Zero Bills homes, while the bigger prize is the millions of existing homes that will never be built to this standard.
“To be fair, the market has started to move there too. More and more lenders are now offering green and retrofit loans, and those products are getting better, even if they are not yet perfect.
“The next step is to scale up that thinking to the leaky Victorian terrace, and merge the mortgage, the grant and the installer so that the homeowner doesn’t have to coordinate all three. This is a really good start and I would like to see the rest of the market follow Santander’s lead.”
Meanwhile, Martin Rayner, financial advisor at Compton Financial Servicestold Newspage there was something else borrowers should consider.
“[Buyers] must also ask themselves whether they are paying a premium for the property itself,” he said.
“If the purchase price is significantly higher, the savings on the energy bill could be offset in the long term by the extra mortgage and interest. This is no reason to abolish the scheme. For many buyers it could offer more financial security, protection against future energy price increases and a more environmentally friendly home.”
“The key is to compare the total cost of ownership with other properties, rather than looking at energy bills in isolation. More innovation and more choice for buyers is always welcome, provided consumers understand exactly what they are paying for.”