Martin Lewis on how to work out if you’re better off fixing as energy bills to hit £3,000
Birmingham mum discusses her huge energy bill
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New analysis conducted by Cornwall Insights is warning that the energy price cap could rise as high as £3,000 by January 2023. Energy bills are already expected to rise in October due to the price cap with a further price hike expected in the New Year. With the cost of living crisis showing no signs of slowing down, Mr Lewis is sounding the alarm that moving onto a fixed tariff may be one of the few options left for some families.
Appearing on Radio 5 Live, the financial journalist shared recent predictions made by Cornwall Insights into how much the energy price cap will go up within the next 12 months.
Mr Lewis said: “The latest prediction is the October price cap will be up, on top of the already astronomical rates, by 51 percent. Meaning that for somebody on typical usage, it will rise from the current £1,971 a year to £2,980 a year.
“That’s the first price cap that only lasts three months. In January, we expect to see around a one percent price hike, taking energy bills to the £3,000 level.
However, Mr Lewis cautioned that the market intelligence firm’s forecast for October is stronger than its January prediction as the UK is currently in the midst of the price cap assessment process.
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He added: “If you remember Ofgem a month ago, it was expecting the price cap to hit £2,800 and in that last month we’ve seen the prediction rise another to £2,980 pounds in October.
“It’s clearly unaffordable. It is a monstrous proportion of the state pension, it is a monstrous proportion of what somebody on Universal Credit lives off.
“It already starts to look that the Chancellor’s emergency £1,200, which I was supportive of, is looking a bit too small for many people when we get to October, because that was predicated on a £2,800 typical use rate in October.”
In light of yet another energy bill hike, Martin Lewis cited the possibility of households exploring the option of moving onto a fixed tariff in a bid to save money.
When it comes to energy bills, a fixed rate tariff means that a household’s unit price for gas and electricity will not change for the duration of their plan with an energy provider.
This means that even if a supplier announces a price hike, someone on a fixed rate will not see their energy bills go up.
In comparison, people on default tariffs will be subject to bill increases as a result of changes to the energy price cap.
The financial journalist and his team at MoneySavingExpert.com did their own maths into how much families can save if they move onto a fixed tariff, based on Cornwall Insight’s data.
Mr Lewis explained: “The big question is, ‘Should you be fixing now?’ Now to decide whether you fix or not is actually rather complicated. What you have to look at is what you will pay over the next year on the price cap.
‘If you look at that, you’ve got around three and a half months left on the current price cap, then three months on the October price cap, three months on the January price cap, and a couple of months on the April price cap.
“Therefore, if you can find a fix at 40 percent or less than you’re currently paying, or if you’re really risk averse or not priced at 45 percent or less than you’re currently paying, then that looks like it adds up.”
However, Mr Lewis warned that many of the fixed tariffs on offer may not be available to new customers of energy suppliers.
“There are a range of companies who are offering existing customers, not new customers, fixes that come within that range,” he added.
“EDF and British Gas are the two big ones. If you’re with one of those, it is worth looking at what the fix they’re offering you is.
“As I say, these are existing customer deals so they don’t have to publish them so I can’t promise they’ll be available to everyone.”
Martin Lewis is the Founder and Chair of MoneySavingExpert.com. To join the 13 million people who get his free Money Tips weekly email, go to www.moneysavingexpert.com/latesttip.
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