In October the energy price cap on standard variable tariffs is expected to be hiked up by a massive 51% in Scotland, England, and Wales, according to MoneySavingExpert. As bills reach highs that we’ve not seen in decades, now is the time for many of us to reassess how we pay for our energy.
MoneySavingExpert’s Martin Lewis has shared his invaluable advice on the topic. The household finance expert’s analysis predicts that by October most households will be paying £2,980 a year for typical use on a default standard variable tariff.
But he adds that there are currently fixed tariffs that are cheaper than the price cap. That means now could be the time to make the switch.
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Should I switch my energy to a fixed tariff?
The simple answer is that it depends on whether you're willing to pay more now to potentially get a cheaper deal in three months' time. Unfortunately, with the energy price cap now changing every three months it's impossible to know for sure that you're getting the best deal, even with Martin's expertise on household finance.
Martin explains that currently there are no “meaningfully cheaper” fixed tariffs than the variable energy price cap. However, switching to a year’s fixed tariff today, although you may be paying more than the variable rate for the next three months, will likely work out to be the cheaper option from October when the energy price cap rises, he suggests.
Writing on MoneySavingExpert’s site Martin said: “If the predictions are right, on average you'll pay 41% more over the next year than you do now.” This includes the three-months from now at the current cap rate.
He added: “If you're offered a year's fix at no more than 40% above your current price-capped tariff, or 45% more if you very strongly value budgeting certainty, it's worth considering.”
Are there any cheaper fixed-rate energy deals?
The money expert added that unfortunately many of the best fixed-rate deals are only available for existing customers, so check out what your energy company is offering before looking elsewhere. Cheaper fixed rate deals open to anyone (known as open-market fixes) are very rarely available.
Additionally, exiting out of a fixed tariff early can also cost you a fee of up to £600 in some cases, MoneySavingExpert reports. So be sure to check the rules of your tariff before considering switching.
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