Beware locking right into a fixed-rate vitality deal, says Cornwall Insight

On Feb 1, 2024

Ofgem-set value cap may drop beneath £1,500 in July
Cornwall Insight says ‘threat’ present fixes won’t translate into financial savings
Tempted to modify? Read what to contemplate within the field on the backside

Updated: 09:10, 1 February 2024

Energy trade analysts have issued a brand new warning about fixed-rate tariffs that include punishing exit charges.

The alert follows analysis which discovered the most cost effective fastened price vitality tariff in the marketplace is £130 a yr increased than the expected annual determine for the official value cap from April 1.

Industry analysts Cornwall Insight have warned households towards signing as much as fixed-rate offers that might go away them out of pocket.

It spoke out following from This is Money a few controversial new fastened price tariff provided by Scottish Power in partnership with Cancer Research UK.

Fix warning: Cornwall Insight says that fixing now could be unwise, with the Ofgem-set price cap set to fall in April and July

Fix warning: Cornwall Insight says that fixing now might be unwise, with the Ofgem-set value cap set to fall in April and July

It is being promoted with claims that it could be £129 a yr cheaper than the prevailing value cap determine of £1,928 for typical annual use.

However, Cornwall Insight say this fastened price deal and others in the marketplace will likely be significantly dearer than the expected value cap determine of £1,620 from 1 April, earlier than it then drops once more to £1,497 in July.

Cornwall Insight stated: ‘Fixed tariffs provide the advantage of locked-in vitality charges, often for a yr or extra, but when variable vitality costs come down, and clients wish to change earlier than the top of their contract, they may incur a big exit charge.’

There are at present 35 fastened price tariffs out there out there. The exit charge on the Scottish Power ‘Help Beat Cancer’ tariff is £150 per gas – a complete of £300 – if the shopper switches to a rival provider.

James Mabey, analyst at Cornwall Insight, provides: ‘After a sluggish comeback, fastened vitality offers have began to draw extra clients, with the assured charges proving more and more interesting to these searching for to guard themselves from additional financial instability.

‘With some fastened vitality tariffs dipping beneath the prevailing value cap, it is understandably tempting to enroll.

‘However, there’s a threat these offers won’t translate to precise financial savings come April, when a big lower within the value cap is projected.

‘It is essential shoppers weigh the fast attraction of a barely lower cost towards the potential for bigger financial savings down the road.’

Tempted to repair? What to contemplate…

With extra vitality suppliers now providing fastened vitality tariffs, many households is likely to be contemplating signing as much as one as soon as once more, writes Sam Barker.

Before taking the plunge, it’s important to contemplate these 4 steps:

1. Make certain the deal is an effective one

To work out if an vitality deal – fastened or in any other case – is cheaper than you’re paying now, examine the unit price and standing cost with what you at present pay.

The common house is paying charges restricted by the Ofgem value cap, which suggests 53p a day in electrical energy standing fees and 30p for fuel, whereas electrical energy unit charges are 29p per kilowatt-hour (kWh) and 7p/kWh for fuel.

The huge variable is what occurs with the Ofgem value cap sooner or later.

It is likely to be doable to lock into a less expensive deal now, solely to see the worth cap fall considerably, leaving you overpaying.

2. Remember to test the exit charges

Many fixed-rate vitality offers include steep exit charges, which you’ll pay should you attempt to go away the deal early.

These might be as excessive as £150 every for fuel and electrical energy.

3. Check your emails

At the second there are nearly no fixed-rate vitality offers on the open market.

But many vitality corporations do have cheaper fixes solely open to their current clients.

They promote these by emailing their clients, so keep in mind to test all emails out of your vitality agency.

4. Timing is every part

Energy costs are predicted to dip this July to £1,497 a yr for common use, down from £1,928 a yr now.

So it could be price holding off on taking a set price till the summer season, when the worth of them might come down.

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