Santander mortgage recognises lower running costs of heat pump homes
UK – Santander UK and Octopus Energy have launched an enhanced mortgage affordability assessment for buyers of selected new-build homes covered by Octopus Energy’s 10-year Zero Bills guarantee.
The arrangement allows Santander underwriters to remove monthly energy costs from the affordability calculation where an applicant does not pass the lender’s standard assessment. Depending on the property, mortgage term and applicant’s circumstances, this could enable eligible buyers to borrow around £30,000 more.
Qualifying homes combine a heat pump with solar PV, battery storage and Octopus Energy’s Zero Bills tariff.
Lower energy costs reflected in mortgage lending
Mortgage affordability assessments typically account for regular household expenses, including energy costs.
Under the new approach, buyers of eligible Zero Bills properties will first be assessed using Santander’s standard affordability process. Where an application does not meet the required threshold, an underwriter may recalculate affordability without the monthly energy expenditure associated with the home.
Santander’s maximum illustrative increase is £29,300 for a property with five or more bedrooms and a 40-year mortgage term. The amount available will vary according to the property, mortgage length, loan-to-income limits and the applicant’s wider financial circumstances.
The initiative creates a more direct link between the operational costs of a home and the amount a buyer may be able to borrow.
Not all homes cost the same to live in, so they shouldn’t all be treated the same when it comes to mortgages
Nigel Banks, Zero Bills Director at Octopus Energy
Ben Merritt, Head of Mortgages at Santander UK, said recognising the 10-year guarantee within its affordability process could help more customers access homes designed to be energy efficient and less expensive to operate.
Heat pumps form part of the Zero Bills specification
Octopus Energy launched its Zero Bills programme in 2022. Eligible homes combine solar PV, battery storage and a heat pump with a specialist energy tariff.
The guarantee covers qualifying household energy bills for 10 years, subject to the programme’s terms, conditions and usage limits. Electric vehicle charging is excluded and is billed separately.
The Santander mortgage arrangement applies to selected eligible new-build homes. It is not currently available for all properties fitted with heat pumps or other low-carbon technologies.
More than 6,000 homes approved
Octopus Energy said more than 6,000 Zero Bills homes have been approved through partnerships with developers including Vistry, Thakeham, Wates and gs8.
The approved developments include affordable and private rental homes, alongside private and shared ownership properties.
Octopus is targeting 100,000 Zero Bills homes by 2030 and has introduced the model in the UK, Germany, France and New Zealand.
Ryan Jude, Programme Director at the Green Finance Institute, said mortgage lending could play an important role in supporting investment in warmer and more efficient homes.
He said Santander’s enhanced affordability approach demonstrated how lenders could recognise the financial value of lower or zero household energy bills.
Finance begins to reflect building performance
The initiative represents a further step towards linking mortgage lending with the operational performance and running costs of low-energy homes.
For the heat pump sector, the model could help make higher-specification new-build properties more accessible by considering the cost of occupying a home alongside its purchase price.
Its wider impact will depend on how broadly the mortgage becomes available, whether other lenders adopt similar affordability methods and whether comparable approaches are eventually extended to existing homes following energy-efficiency improvements.
