Octopus Energy and Perenna Offer New ‘Zero Bills’ Mortgage

Octopus Energy has launched a novel Zero Bills mortgage in partnership with bond bank Perenna. The aim is to help customers move into houses kitted out with green energy technology such as heat pumps and solar panels and guarantees there will be no energy bills for at least five years.

This exciting development will appeal to first-time buyers, environmentally-conscious homeowners, and anyone looking to reduce their household bills.

We examine this new offering to determine whether prospective homeowners should consider it and whether it will become more commonplace in the years to come.

What is it?

Perenna offers the Zero Bills mortgage and is available on new build homes with the right combination of solar panels, heat pumps and a home battery. It’s important to note, that this scheme only applies to specially built ‘Zero homes’ and doesn’t apply to every home with these appliances.

The scheme is currently only focusing on new builds, but there is scope to expand it to existing homes down the line. The zero energy tariff only applies to Octopus Energy customers and guarantees zero bills for at least five years.

The tariff is factored into Perenna’s affordability calculations, which means you get a lower rate than their standard mortgages, rewarding customers who opt to live in a sustainable home.

What are the benefits of the Zero Bills mortgage?

Aside from the guarantee of not paying any bills for at least five years, the Zero Bills mortgage has some other advantages that make it an interesting proposition for consumers.

• You can borrow up to 6x your income, which is more generous than most other high street lenders who often only consider 4 to 4.5x income.
• A short early repayment charge (ERC) giving you more flexibility when considering whether to make overpayments or not. You face a 5% ERC in the first year, which decreases by 1% every year.
• Monthly payments that remain the same no matter what.
• No cap on the age at which you can apply, meaning you can potentially get a mortgage if you’re over 50.
• Octopus Energy estimates that Zero Bills households will save £1,800 a year compared to homes on a standard tariff.

These are generous terms and make the Zero Bills mortgage a good option to consider. Another potential bonus is that homes with high energy efficiency and integrated renewable energy systems could increase in value and appeal over time.

One big downside is that if there aren’t Zero Bills homes near you, it’s unlikely you’ll be able to apply for the mortgage. With over 1,000 homes accredited, until more Zero Bills homes are built nationwide, the mortgage will only be available in certain areas.

Octopus Energy aims to deliver 50,000 Zero Bills homes globally by 2025, so there is scope for the scheme to be available to more people soon.

Is a Zero Bills Mortgage a good idea?

Given concerns over the climate crisis and the cost of living, the Zero Bills mortgage aims to kill two birds with new stones. It provides sustainable homes built to withstand the effects of climate change while reducing household bills.

One of the problems we’re concerned about at Online Mortgage Advisor is the lack of homes across the country. More homes need to be built, and if they can be built in an environmentally friendly way, that’s even better.

The Future Homes Standard, due to come into force in 2025, aims to reduce carbon emissions by 75%. If the scheme goes well, it’s possible that more developers will build houses that match Octopus Energy’s requirements, and more lenders will offer similar mortgages.

The UK has some of the oldest housing stock in Europe, with many homes energy inefficient. If Octopus Energy can follow through on its plans to retrofit existing homes with green energy solutions, this scheme could become a great option for people looking to get on the housing ladder while saving on costs.

As it stands, the Zero Bills mortgage is an intriguing niche product unlikely to be available to the majority of people in the country.

Should more homes be built that match these specifications, the Zero Bills mortgage could become an intriguing option for many people in the housing market.