Martin Lewis has updated his advice on whether you should fix your energy tariff or stick to the price cap after it rose by 54% in April. At the end of March 2022, he advised people against getting a fix, saying: "It's just not worth it. Stick on the price cap."
But now a month on, the founder of Money Saving Expert has advised that it may now be worth fixing your tariff for financial security. The financial expert said his advice is based on the most recent data published by energy market analysis company Cornwall Insight.
He 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."
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"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. [Cornwall Insight is] currently saying in October that there is going to be another rise of 32%, 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."
From April 2023 Martin said the prices are much less certain as we are not yet in the assessment period. However, he said Cornwall Insight predicts they might drop from the October price cap.
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Martin said: "They think it will drop in April by about 12% from the October price cap, taking someone on typical use to £2,300 - still higher than the current price cap." He explained that if you consider all of these predictions, you would expect rates on average to be around 17% higher than they are now.
"On that logic" Martin said, "If you can find a fix that is no more than 17% 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%, if you could find a fix at no more than 25% 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."
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