Martin Lewis has issued a new update on whether you should fix into an energy deal - and explained that now might be the time for some households to act.
The MoneySavingExpert has been urging the majority of homes to “do nothing” and stick on the energy price cap rate, due to a lack of cheap open market deals.
However, experts are now predicting that the price cap could rise to £2,800 this October, followed by an increase to £2,900 in January.
Based on these figures, Martin said those looking for price certainty may now want to fix into an energy deal, as there are open market rates that are cheaper than the October price cap.
The current price cap, which sets a limit on the rates a supplier can charge for each unit of gas and electricity you use, is £1,971 a year for those on a default tariff who pay by direct debit.
Writing in the latest MoneySavingExpert newsletter, Martin explained that if you’re looking to fix, you should be looking for a one-year fixed rate tariff that is no more than 35% to 40% above the current price cap.
He said this is based on factoring in four months on the current rate, three at the predicted October rate, three at the estimated January rate and two at the April rate.
“If the predictions are right, on average you'll pay 35% more over the next year than you do now,” explained Martin.
Are you worried about affording your energy bills this winter? Let us know: mirror.money.saving@mirror.co.uk
“Of course, some of this is crystal-ball gazing and averaging, but overall my best guess, as a rule of thumb, is...
“If you're offered a year's fix at no more than 35% above your current price-capped tariff, or 40% more if you very strongly value budgeting certainty, it's worth considering.”
The cheapest fixed rates are typically for existing customers only, but Martin has now highlighted some open market rates that fall below his 35% to 40% threshold.
The lowest price open market tariff that “just scrapes” into his equation is from Ovo Energy, which is offering a one-year fix on its Better Smart plan that is 38% more than the current price cap.
In terms of existing customer deals, Martin highlighted an E.on (Next) V14 one-year fix that is 30% more.
There are also one-year tariffs from SSE, Ovo Energy and British Gas that work out at 32% more compared to the current price cap, again if you’re already a customer.
Martin explained how two-year fixes are harder to predict in terms of value for money, as it is less certain how energy prices will fluctuate.
The warning from Martin comes after the boss of Ofgem warned the energy price cap could rise to £2,800 in October.
Energy consultant Cornwall Insight put the October price cap at the slightly higher £2,879, before rising to £2,907 in January, under new rules that mean the cap can be adjusted every three months.
Millions of households will receive a £400 discount on their energy bills later this year as families continue to struggle against the cost of living crisis.
The new support was confirmed as a replacement for the £200 "loan-not-loan" that would've needed to be paid back starting from 2023.
