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Historically, UK mortgage affordability was completely bound to rigid, static formulas. Standard Office for National Statistics (ONS) expenditure benchmarks and historical stress tests meant that two applicants earning the exact same salary were treated identically by underwriting engines, regardless of their actual outgoings or the energy efficiency of the property they were buying.
However, driven by high interest rates, elevated living costs, and evolving property energy standards, forward-thinking lenders are pivoting toward more nuanced underwriting strategies that look at actual outgoings, and recognising existing lifestyle affordability evidence.
What is Zero-Bill underwriting?
A major player in this movement is Santander, who, in partnership with Octopus Energy, have developed the "Zero Bills" mortgage assessment initiative. A first of its kind product which entirely removes utility expenses from the affordability assessments of those buying accredited eco-new builds (ultra-efficient and accredited homes with solar PV panels, a home battery, and an air-source heat pump).
For the average first-time buyer, this has the potential to unlock up to £30,000+ in extra borrowing capacity. As eco-tech becomes increasingly standard in UK new builds, and the government implements new minimum energy efficiency standards, we can expect to see many more lenders follow suit to compete with this groundbreaking initiative.
For mortgage brokers, this presents a major opportunity to solve client affordability hurdles. We look at how to introduce this type of underwriting to clients, and how to prepare for increasingly dynamic affordability criteria in the future.
Explaining "Zero Bills" underwriting vs. standard green mortgages to clients
To advise clients effectively, brokers must clearly distinguish between first-generation green mortgages and the true affordability-integrated underwriting offered by the newer green products, such as the Zero bill initiative.
Feature | First-Gen Green Mortgages (e.g. Green home mortgage) | "Zero Bills" Affordability Underwriting (Santander & Octopus) |
Primary Mechanism | Small rate discount (0.10%–0.20%) or cash back (£500–£1,000). | Zeroes out utility expenditure entirely from stress testing. |
Affordability Impact | Marginal improvement to monthly repayments. | Substantial increase in maximum borrowing capacity (up to £30,000+). |
Qualification Requirement | Valid EPC rating of A or B. | Accredited eco-new build meeting Octopus "Zero Bills" spec (Solar PV, battery, heat pump). |
Underwriting Shift | Standard ONS expense baseline still applies. | Baseline utility expense removed from underwriting calculator. |
How this works in Practice
Under the Santander and Octopus Energy partnership, buyers purchasing accredited new builds guaranteed to generate £0 in energy bills for 5 to 10 years (subject to fair-use caps) have their estimated energy expenditure removed from standard stress testing.
With average UK household energy bills sitting at roughly £1,600+ annually for a typical 3-bedroom home, eliminating this expense converts directly into disposable income on their application. This could be useful to:
First-time buyers
If a client falls short of their target loan amount on a standard resale property, introduce energy efficiency as an explicit borrowing tool. However, be sure to make clear that this only applies when they are buying a new-build property with eco credentials that match the scheme.
Rebalancing new-build purchase premiums
Clients often push back against higher new-build purchase prices compared to older stock. Brokers can reframe that the zero-bills guarantee could still save them money over all, compared to a cheaper property with higher running costs.
Be sure to manage expectations
To maintain compliance and set realistic expectations, ensure clients understand the key parameters:
Fair-use thresholds: The £0 energy bill guarantee applies up to a generous, specified usage cap - make sure they are aware of this cap and weigh this up against their typical annual usage
Guarantee duration: Zero energy guarantees are set for an initial 5-to-10-year term, meaning that they may not always have access to zero cost utilities in their new home
Property eligibility: Eligibility is currently restricted to developer-accredited new builds that feature integrated solar PV, battery storage, and heat pump technology. This will drastically limit the number of applicants eligible for this type of underwriting, so be sure to carefully assess their eco-accreditation
How we can expect to see dynamic affordability initiatives applied more broadly
While Santander are pioneering Zero-bills underwriting alongside their energy partner, Octopus, it’s very much expected that this will be part of a larger shift towards similar eco-friendly initiatives. However, in recent years, there has already been a somewhat broader shift towards real-world affordability assessment in general. For example:
- Rental track record products - such as those offered by Skipton allow applicants to use 12 consecutive months of verified, on-time rent payments to prove real-world affordability, without standard deposit or guarantor requirements
- Extended income multiple lending - such as Nationwide Helping Hand, which uses longer-term rate certainty, like 5 or 10-year fixed rates to mitigate rate-shock risk
- Open Banking - Many lenders now use real-time cash flow analysis of live transaction data to establish true non-discretionary commitments, rather than relying solely on outdated ONS estimates
Preparing for the Future Homes Standard (FHS)
Under the UK Government’s Future Homes Standard (FHS), all new homes built in England will require low-carbon heating and solar panels as standard. This is expected to make way for the broader integration of property energy performance into mortgage underwriting criteria.
As green building specifications become mandatory across new developments, energy-adjusted stress testing will likely become a standard tool in the broker's toolkit. Advisers who build relationships with local eco-new build developers and master these criteria today will hold a distinct advantage in guiding clients through the evolving affordability landscape.