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July 2025 – A groundbreaking mortgage product from Santander UK and Octopus Energy is rewriting the affordability playbook. The zero-bills mortgage excludes guaranteed household energy costs from affordability calculations for buyers of Octopus Zero Bills homes—new-build properties equipped with solar panels, battery storage, and heat pumps, with no home energy bills for at least 10 years. Eligible buyers can borrow up to £30,000 more than under a standard assessment, depending on property size and mortgage term.
The product addresses a long-standing mismatch: lenders have traditionally used Energy Performance Certificates (EPCs) as a proxy for energy costs, but EPC A or B rated homes typically deliver only 10–20% lower bills than average. Technologies like battery storage and smart tariffs—which can eliminate bills entirely—are not captured in the current EPC framework. "That changes the economics much more significantly," said Nigel Banks, zero bills director at Octopus Energy. "And because we can guarantee it's zero up to a fair use limit, that gives Santander real confidence."
For Michael Taylor, homes propositions lead at Santander, the logic is straightforward. "Energy bills are such a material amount in a household's expenditure. Where lenders can, we should be looking to accurately reflect that in our mortgage affordability assessments." The product is designed to help marginal buyers who would otherwise fall just short of affordability thresholds. Taylor noted that the adjustment can be decisive: "It can be the difference between the buyer being able to afford the home and not. It can be a real dealmaker."
Why other lenders are waiting
Barriers to widespread adoption are largely internal. Changes to affordability assessment require systems development, process sign-off, and competition for prioritisation within large organisations. Many lenders are timing their moves for 2028, when the UK's Future Homes Standard (FHS) fully takes effect, rather than acting now. The FHS, confirmed in March 2025 to apply from March 2027 with a transition through March 2028, requires all new homes in England to be built with heat pumps and solar panels as standard. Taylor said: "Lenders will probably be readying themselves, but maybe with a little bit of a further-out timeline. We've just spotted the opportunity."
The slow supply of eligible homes has also been a factor. Most major housebuilders were still constructing gas-heated homes when Zero Bills launched, because grid connections and site specifications were not designed for heat pumps from the outset. "For most of the major housebuilders, they were building 90% of their homes with gas on sites that were live," Banks said. "That seriously restricted the available sites that could easily upgrade to a zero-bills specification."
Economics have flipped
Solar panel and battery costs have roughly halved in three years and stand at about a tenth of what they were a decade ago. "It has flipped from being too expensive to now being financially viable, and the savings are real," Banks said. The affordability improvement can be substantial: "If that energy bill being zero means there's £20,000 more affordability, that can more than match a cost of say £10,000 extra to build to zero-bills specification. Buying a zero-bills home may actually be more affordable than buying a standard new-build home with the new Santander mortgage product."
Broker implications and retrofit potential
Santander has structured this as a named, branded proposition so brokers have clarity before placing cases. The affordability uplift exists specifically for marginal cases—not every buyer needs it, but for those who do, it can be decisive. Taylor emphasised that protection from energy price volatility is as important as the monthly saving: "It's not just about saving money. It's that peace of mind."
The proposition extends beyond new build. Santander and Octopus piloted a retrofit of a 1980s four-bedroom family home in Milton Keynes to zero-bills standard in a single working week. Banks said the retrofit potential is significant, with an estimated 500,000 UK properties built since 2013 potentially eligible for upgrade. Similar products, such as Nationwide's 0% green additional borrowing for energy-efficient home improvements, show lenders are increasingly looking at both new build and existing stock.
EPC reform and a valuation premium ahead
Banks flagged that EPC reform is coming, with a smart readiness indicator and half-hourly tariff analysis set to be incorporated into the rating system within the next year or so. He also raised the possibility that future affordability models could extend to transport costs, with smart-charged electric vehicles costing between an eighth and a tenth of the equivalent petrol or diesel running costs. "The shift we've seen in the last five years means the economics have really flipped. What is the right environmental solution is now the right economic solution."
Santander's own research found that 8% of UK adults cite reducing energy bills as their main motivation for home improvements. Taylor said that as awareness builds, Zero Bills homes should begin to command a price premium over standard properties, but acknowledged the market is not there yet. "Once you get enough households recognising the strong benefits, that should start to be reflected in a Zero Bills home achieving a premium versus a standard home."
What this means for the US market
While the zero-bills mortgage is currently a UK product, the concept has clear relevance for US lenders. American homeowners spend an average of $2,000–$2,500 annually on energy bills, and the US Department of Energy estimates that energy-efficient upgrades could cut
