Santander offers enhanced affordability for zero energy bills homes

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.

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.

thinking for them.

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.

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.

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.

This is a really welcome and innovative move. Taking energy bills out of the equation reflects the real world, because these homes are built to run on next to nothing, and letting buyers borrow up to £29,000 more could be the difference between getting on the ladder or not. It definitely fits within the framework of getting Britain moving.

The catch is that it only applies to a very specific type of new build, so the pool of eligible homes is small for now and buyers still need to weigh up the usual new build price premium. I'd also want clients to read the fine print on that ten year guarantee before banking on it, but on the whole this is a smart, forward thinking step and I hope other lenders follow Santander's lead.