SANTANDER “deserves genuine credit” for offering enhanced affordability of up to £29,000 for zero energy bills homes, property experts have said.
From today, Santander has introduced a new proposition offering enhanced affordability for people buying Octopus Zero Bills new build homes. Octopus Zero Bills homes are eligible for Octopus Energy’s world-first smart tariff, Zero Bills.
These homes combine solar PV, battery storage and heat pumps with the Octopus tariff to deliver no energy bills for the home, guaranteed by Octopus for at least 10 years.
Borrowers get peace of mind from being protected against future energy price rises, Energy Performance Certificate (EPC) A-rated energy-efficient homes and the flexibility to borrow more – due to removing energy bills from the affordability assessment.
Santander says the affordability enhancement means borrowers could unlock up to £29,000 more borrowing when buying an Octopus Zero Bills home — subject to loan to income thresholds.
This comes as just yesterday Santander increased its fixed rates across its new business range by up to 0.3%.
Credit to Santander
Matt Coulson, Founder at Rickmansworth-based Heron Financial, said Santander should be praised for the scheme.
He added: “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.
“The only real catch is one of reach. 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. To be fair, the market has started to move there too. More lenders now offer green and retrofit lending, and those products are getting better, even if they aren’t perfect yet.
“The next step is scaling that thinking to the leaky Victorian terrace, and joining up the mortgage, the grant and the installer so the homeowner isn’t left to coordinate all three. This is a very good start, and I’d like to see the rest of the market follow Santander’s lead.”
Stephen Perkins, Managing Director at Norwich-based Yellow Brick Mortgages, said the guarantee is valuable.
He added: “Affordability shouldn’t just be about the mortgage payment, it should reflect the total cost of owning the home. 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.”
Positive development
David Stirling, Independent Financial Adviser at Belfast-based Mint Wealth, said it is a “bold” move.
He added: “In a week dominated entirely by lenders raising rates, Santander has done something refreshingly different and delivered actual good news. 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. 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. That said, lenders rewarding genuine energy efficiency with better terms is the incentive structure the market has needed. Enjoy the good news as it’s been a very long week.”
Martin Rayner, Financial Adviser at Compton Financial Services, said borrowers need to look at costs closely.
He added: “Anything that reduces household energy costs and carbon emissions is a positive development. Giving buyers access to higher borrowing because their ongoing costs are lower also makes sense. The financial detail is what matters though. Buyers should not just focus on the promise of zero energy bills.
“They also need to ask whether they are paying a premium for the property itself. If the purchase price is significantly higher, the savings on energy bills could be offset by the extra mortgage and interest over time. This is not a reason to dismiss the scheme. For many buyers it could provide greater financial certainty, protection from future energy price rises and a more environmentally friendly home.
“The key is to compare the total cost of ownership against 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.”
Benefit
Jamie Alexander, Mortgage Director at Romsey-based Alexander Southwell Mortgages, said the market needs product innovation such as this.
He added: “This is genuinely interesting and the logic stacks up. 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.
“The extra borrowing capacity is a real benefit for buyers who are being squeezed on affordability, and the EPC A rating and protection against future energy price rises are worth something too. The catch worth watching is what happens at year eleven. The guarantee runs for 10 years but mortgages run for much longer.
“Buyers should go in clear-eyed about what their energy costs look like once that guarantee expires, and whether the technology still performs as promised a decade down the line. That aside, this is the kind of product innovation the market needs. Lenders recognising that a greener, cheaper to run home is a different financial proposition is a step in the right direction.”
Photo by Ondrej Supitar on Unsplash.
