Santander and Octopus Energy new £29,000 update issued | Personal Finance | Finance
Santander is rewarding buyers of certain homes by allowing them to take on larger mortgages.
The bank has launched a new deal with Octopus Energy that could increase a buyer’s borrowing power by as much as £29,000 when purchasing an Octopus Zero Bills new-build home. The move has won praise from mortgage experts, with one saying Santander “deserves genuine credit” for recognising that households with no energy bills can afford bigger mortgage repayments. The scheme applies to homes equipped with solar panels, battery storage and heat pumps that qualify for Octopus Energy’s Zero Bills tariff.
The energy supplier guarantees occupants will have no household energy bills for at least 10 years, shielding them from future price rises.
Because buyers are not expected to have monthly gas and electricity costs, Santander is excluding those bills from its affordability calculations, allowing eligible borrowers to qualify for larger loans.
The launch comes just a day after Santander increased fixed mortgage rates across its range by up to 0.3%, reflecting wider pressures in the mortgage market.
Matt Coulson, founder of Heron Financial, said the lender had broken new ground. He said: “Credit to Santander and Octopus for this, and I mean that. Recognising that a home with no energy bills is cheaper to run, and letting that count towards what someone can borrow, is exactly the right principle.
“Santander being first to move on it deserves genuine credit, and Octopus’s Zero Bills work is doing something real for the buyers it reaches.”
However, he warned the biggest challenge is that the offer only applies to a relatively small number of specialist new-build properties.
“The only real catch is one of reach,” he said. “It applies to new-build Zero Bills homes, when the bigger prize is the millions of existing homes that will never be built to this standard.”
He added that lenders should eventually extend similar thinking to older, less energy-efficient homes that have been upgraded. Stephen Perkins, managing director of Yellow Brick Mortgages, told Newspage the approach reflected the true cost of owning a property.
“Affordability shouldn’t just be about the mortgage payment, it should reflect the total cost of owning the home,” he said.
“If a property genuinely costs less to run, it’s logical that this is recognised in affordability assessments. The key is making sure those savings are real and sustainable, which is why the guarantee behind this proposition is so important.”
David Stirling, of Mint Wealth, described the move as “refreshingly different” after a difficult week for borrowers.
“In a week dominated entirely by lenders raising rates, Santander has done something refreshingly different and delivered actual good news,” he said.
“By removing energy bills from its affordability assessment for Octopus Zero Bills homes, borrowers could unlock up to £29,000 in additional borrowing capacity. For first-time buyers battling deposits and income multiples, that is not nothing.”
He said the offer was backed by a contractual guarantee but urged buyers not to focus solely on the promise of free energy.
“The proposition is bold and the guarantee is contractual, though buyers should ensure the house stacks up on its own merits before the zero bills figure does all their thinking for them.”
Martin Rayner, of Compton Financial Services, also urged buyers to look beyond the headline savings. He said households should compare the overall cost of owning the property, including any premium paid for an energy-efficient home.
“If the purchase price is significantly higher, the savings on energy bills could be offset by the extra mortgage and interest over time,” he said.
“The key is to compare the total cost of ownership against other properties, rather than looking at energy bills in isolation.”
Jamie Alexander, mortgage director at Alexander Southwell Mortgages, said the idea represented the sort of innovation the mortgage market needs.
“This is genuinely interesting and the logic stacks up,” he said.
“If a household has no energy bills for 10 years, guaranteed, then removing that from the affordability assessment makes sense. It is not a gimmick, it reflects the actual financial position of the borrower.”
He cautioned that buyers should also consider what happens once the 10-year guarantee expires.
“The catch worth watching is what happens at year eleven. The guarantee runs for 10 years but mortgages run for much longer.”
The launch highlights how lenders are increasingly using a home’s energy efficiency to shape mortgage decisions as households continue to face pressure from higher housing costs.
For buyers able to secure one of the qualifying homes, the prospect of borrowing more while avoiding energy bills for a decade could prove a powerful attraction – even if experts say the sums still need careful checking before signing on the dotted line.
