Martin Lewis, the self-styled Money Saving Expert, has changed his advice on whether to fix energy tariffs. Until recently, Lewis was advising most people to stick on their existing tariff, but he now says it could be worth going for a fixed-rate deal.
Lewis said: "The current price cap for someone on duel fuel, typical use is £1,971 a year. That went up massively on April 1 and that's where it sits right now.
"That will last until the beginning of October and the October price cap is based primarily on wholesale rates that energy firms pay between the start of February and the end of July. That means we do have a little bit more certainty [now] because things are solidifying from where they were [a few weeks earlier] on what's likely to happen in October.
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"Cornwall Insight, an energy market analyst, is] currently saying in October that there is going to be another rise of 32 per cent, taking the price cap for someone with typical use to around £2,600. That is slightly less than we predicted it to be.
"As we are half way through the period … there is very little chance that we are going to see prices drop in October. We would need to see a monumental, unprecedented drop in wholesale gas and electricity prices for that to happen."
So what does that mean for people now? Well, bear with us (and Martin).
He said there is less certainty about what prices will be like from next April, when the price cap will change again. However, Cornwall Insight's current best guess is that the cap will drop by around 12 per cent, taking someone on typical use to around £2,300 per year.
That is around 17 per cent higher than they are at present. "On that logic," Martin said, "if you can find a fix that is no more than 17 per cent higher than the rates you're currently paying [or what you'll pay when your fix ends] then that's worth doing.
"I think a fix does have the merit of price certainty … therefore if you value price certainty I think that is worth factoring in as a premium. I would suggest as a rough rule of thumb even though the maths says 17 per cent, if you could find a fix at no more than 25 per cent higher than the current price cap rate and you value price certainty, it is probably worth fixing at that rate.
"It's worth remembering if rates were to drop dramatically in the future and you would be able to fix at a much cheaper rate in the future, then you do pay an early exit penalty … but that is relatively trivial compared to how much people are paying for gas and electricity today."
The government has announced two measures to help people with their fuel bills: a £150 council tax rebate, which doesn't need to be paid back, and £200 off your energy bills in October, which does. Lewis has criticised the latter measure, calling it a "loan-not-loan"; the government has repeatedly said it is not a loan, even though customers will be forced to pay it back over five years.
