Santander helps buyers borrow more on Octopus Zero Bills new-build homes

Santander helps buyers borrow more on Octopus Zero Bills new-build homes

 

Santander has become the first major mortgage lender to support Octopus Zero Bills new-build homes by removing monthly energy bills from its affordability assessment in some cases. Initially, the scheme was launched through Perenna mortgages.

The change could help homebuyers borrow more when purchasing an eligible new-build property with solar panels, battery storage and a heat pump connected to the Octopus Zero Bills smart energy tariff. Octopus guarantees that eligible Zero Bills homes will have no energy bills for at least 10 years, which can reduce household running costs and give buyers more certainty over their monthly outgoings.

Santander says buyers may be able to borrow up to £29,000 more using its bespoke affordability assessment, although the exact amount will depend on the property, mortgage term, loan-to-income limits, underwriting and the applicant’s circumstances.

What is an Octopus Zero Bills home?

An Octopus Zero Bills home is a new-build property designed to produce and manage its own energy. These homes typically combine solar PV panels, battery storage and a heat pump.

When the property is connected to Octopus Energy’s Zero Bills tariff, Octopus guarantees no energy bills for at least 10 years. This can make the running costs of the home lower and more predictable, which is particularly attractive at a time when household bills remain a major concern for buyers.

Santander says its new affordability approach is designed to reflect these lower running costs. Where a buyer does not pass standard affordability, the lender’s underwriters may have the flexibility to remove monthly energy bills from the affordability calculation.

How much more could buyers borrow?

Santander says buyers could unlock up to £29,000 more borrowing when purchasing an Octopus Zero Bills new-build home. The lender’s examples show the potential additional borrowing increasing with larger properties and longer mortgage terms.

For example, Santander’s illustrative figures show additional borrowing of around £10,900 to £12,700 for a one-bedroom property, depending on the mortgage term. For a five-bedroom-plus property, the extra borrowing could range from £25,000 to £29,300. These figures are illustrative, and actual borrowing will depend on the client’s full circumstances and the lender's assessment.

This could be useful for buyers who are close to passing Santander’s affordability calculation but need slightly more borrowing to secure the property.

Why is Santander changing its affordability rules?

Mortgage lenders assess affordability by looking at income, credit commitments, household expenditure and expected mortgage payments. Energy bills form part of that wider affordability picture.

With Octopus Zero Bills homes, the buyer should not have standard energy bills for the guaranteed period. Santander is therefore allowing underwriters to remove monthly energy costs from the affordability calculation where a case needs enhanced affordability and the property qualifies.

This does not mean every buyer will automatically be able to borrow more. If the application already passes Santander’s standard affordability test, the case will proceed as normal. If it fails standard affordability or only produces a lower maximum loan than required, Santander’s New Build Team can review whether the Zero Bills affordability approach can help.

New 10-year fixed rates for Zero Bills homes

Santander has also introduced new 10-year fixed rates for new-build buyers. The lender says these provide mortgage payment certainty that matches the 10-year no-energy-bills guarantee, giving borrowers more certainty over two major household costs: their mortgage payment and energy bills.

A 10-year fixed rate will not suit every borrower, but it may appeal to buyers who want long-term payment stability and plan to stay in the property for several years.

Who could benefit from Santander’s Octopus Zero Bills affordability boost?

Santander’s approach could help:

• First-time buyers purchasing eligible Zero Bills new-build homes.
• Home movers buying energy-efficient new-build properties.
• Borrowers who narrowly miss standard affordability.
• Buyers who need a slightly larger mortgage to secure the property.
• Applicants who want more predictable mortgage and energy costs.
• Families buying larger new-build homes where the potential affordability uplift may be higher.

It may be particularly useful for buyers who are stretching their budget but do not want energy bills to limit how much they can borrow.

How do buyers check if a property is eligible?

Santander says brokers can check whether a property is an Octopus Zero Bills home by entering the postcode into the Octopus Zero Bills Register.

If the property qualifies and the buyer needs enhanced affordability, the broker can contact Santander’s New Build Team. The application can then be passed to an underwriter who may remove energy costs from the affordability calculation.

Aaron Strutt, Product Director at Trinity Financial, says:

“Santander’s decision to recognise Octopus Zero Bills homes in its affordability assessment is a practical and positive step for new-build buyers.

“Energy costs are a major household expense, so if a property genuinely has no energy bills for 10 years, it makes sense for lenders to consider this when assessing affordability. For some buyers, the extra borrowing could be the difference between being able to purchase the property or missing out.

“However, buyers still need to be careful. The property must qualify, the mortgage still needs to fit Santander’s wider lending criteria and the borrower must be comfortable with the repayments. It is important to compare Santander’s approach against other new-build mortgage lenders before applying.”

Should you choose Santander for a Zero Bills new-build mortgage?

Santander may be a good option if you are buying an eligible Octopus Zero Bills new-build home and need additional borrowing to pass affordability.

However, the best lender will depend on your deposit, income, credit commitments, employment type, property value, mortgage term and whether you want a two, five or 10-year fixed rate. Some buyers may get a better outcome with another lender, especially if they do not need the enhanced affordability assessment.

Trinity Financial’s brokers can compare Santander’s Zero Bills new-build approach against the wider mortgage market and check whether it offers the best overall deal.

Call Trinity Financial on 020 7016 0790 to secure a fixed or tracker rate mortgage, book a consultation, or use our appointment calendar

The information contained within was correct at the time of publication but is subject to change. It is for general information purposes and is not advice.

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