In a crucial intervention for millions of households, consumer champion Martin Lewis has issued timely guidance on navigating the UK's volatile energy market. The founder of MoneySavingExpert.com has analysed the latest predictions and offered a clear verdict on whether consumers should lock into a fixed deal now or stick with the variable tariff.
The current Ofgem price cap, which dictates the maximum rate suppliers can charge typical households on variable tariffs, is £1,928 a year. This is set to change in just a few weeks.
The April Dip and Winter Spike
Lewis confirms that the price cap is expected to fall by around 15% on 1st April 2024, bringing the typical annual bill down to approximately £1,635. This offers a brief respite for bill-payers.
However, the relief may be short-lived. Current forecasts from leading energy consultancy Cornwall Insight suggest the cap will jump back up by 12% in October 2024, taking the typical bill to roughly £1,832 for the last quarter of the year.
The Million-Pound Question: To Fix or Not to Fix?
Lewis provides a clear framework for decision-making. His advice hinges on one key principle: "Are you willing to pay a premium for price certainty?"
He states that for most people, fixing a tariff now is unlikely to be a massive money-saving win. The best fixed deals currently on the market are only slightly cheaper than the predicted April-to-October average.
However, he identifies a specific scenario where a fix could be beneficial: "If you are someone who values budgeting certainty... then it is worth considering." Locking in a rate now protects you from the anticipated October price hike and potential market volatility caused by global events.
Martin Lewis's Golden Rule
For those considering a fixed deal, Lewis lays down a simple rule. You should only commit if the tariff is no more than 5% above the current April-June price cap of £1,635. In practical terms, this means a fixed deal should cost no more than £1,717 a year for a typical user to be considered a reasonable option for price security.
His final word for most households? "My cheapness mantra is that you should probably do nothing... you're likely to be better off staying on the price cap." This advice offers a clear path forward for consumers grappling with one of the biggest household expenses.
