Energy prices will fall by 7 per cent for millions of homes from today, but are set to rise again from October – so is now the time to fix your tariff?
The average household paying by direct debit will see their annual gas and electricity bills fall from £1,690 to £1,568 today, a drop of £122 – although exactly how much your bills rise depends on how much energy you use.
This is due to Ofgem reducing its rate cap, which sets the fixed charges and unit prices that households pay on variable rate energy tariffs.
Most households have taken these deals since prices rose in 2022, but fixed-rate tariffs are now starting to return, allowing them to stabilize energy costs for a year or two.
Spike: Ofgem’s price cap peaked in early 2023 and is now falling to a lower level – but could still rise a small amount later this year
Analysts at Cornwall Insight believe the typical energy bill will rise to £1,636.44 in October and rise slightly again to £1,634.20 in January 2025.
But if the maximum price drops significantly after that, there is a risk that those who choose a fixed-rate deal today will end up overpaying.
So what fixed price deals are out there and are they worth considering?
Should you take a fixed energy tariff?
No one can say for sure whether energy prices will rise, fall or stay the same.
So taking a deal with a fixed interest rate means risking the future direction of these bills.
However, Cornwall Insight has a good track record of accurately predicting the direction of energy bills, and has been very reliable.
On this basis, installing at a cheaper price today seems like a good way to achieve modest energy savings in 2024.
But the problem is that there are very few deals on cheap stationary power.
A spokesman for Cornwall Insight said there were just 31 fixed-price deals in the open market as of June 27.
However, there are a lot of secret fixed-price energy deals that energy companies only offer to their existing customers.
These prices can be cheaper than the price ceiling, but in practice most remain just below it.
The only way to know if a fixed price deal is good value for you is to see how much you’re paying for energy now, and compare it to any fix being offered.
“The long-term outlook remains very uncertain, and prices are expected to remain at a similar level in the first quarter of next year,” said USwitch energy expert Ben Galizzi.
“So households should avoid being lulled into a false sense of security by lower energy bills this summer, as the grace period will be relatively short-lived.
“It is important to prepare now for future price increases and consider locking in prices while there are competitive deals to choose from.”
How do I know the repair will save me money in energy?
To find out if an energy deal – fixed or otherwise – is cheaper than what you’re paying now, compare the unit price and lifetime cost to what you’re currently paying.
The average household pays rates capped by Ofgem’s rate cap.
From July 1, this means paying 60.12p per day as a flat rate for electricity and 31.41p for gas, while unit prices will be 22.36p per kilowatt-hour (kWh) for electricity and 5.48p/kWh for gas.
The huge variable is what happens with Ofgem’s price cap in the future. It may now be possible to make a cheaper deal, only to see the maximum price drop significantly, leaving you overpaying.
Beware of exit fees on your energy bill
Another disadvantage of fixed price energy deals is that they often come with high exit fees, unlike variable price deals.
An exit fee is payable when you leave a fixed-rate energy deal before the end of the term, usually 12 months.
The researchers found that exit fees increased by 345 per cent from an average of £42.06 in early 2021 to a peak of £187.21 in April 2024.
This could pose a problem for anyone getting a fixed interest rate now.
Most repairs take between 12 and 24 months, and it is impossible to predict what energy prices will do during that period.
It may be possible to stick with the reform now and save money, and then it won’t stick until energy prices rise in 2025.
If that happens, anyone seeking a fix will need to know whether it is cheaper to stay where they are, or pay an exit fee and trade for a lower-priced deal.
Save money, make money
![Top prices plus £50 bonus until July 15th](https://media.sailthru.com/composer/images/sailthru-prod-626/Raisin_122x84.png)
![Top prices plus £50 bonus until July 15th](https://media.sailthru.com/composer/images/sailthru-prod-626/Raisin_122x84.png)
Savings Offers
![Top prices plus £50 bonus until July 15th](https://media.sailthru.com/composer/images/sailthru-prod-626/Raisin_122x84.png)
![Top prices plus £50 bonus until July 15th](https://media.sailthru.com/composer/images/sailthru-prod-626/Raisin_122x84.png)
Savings Offers
Best prices plus £50 bonus until 15 July
![Includes 0.88% bonus for 1 year](https://media.sailthru.com/composer/images/sailthru-prod-626/plum_122x84.png)
![Includes 0.88% bonus for 1 year](https://media.sailthru.com/composer/images/sailthru-prod-626/plum_122x84.png)
Cash Issa with 5.17% interest
![Includes 0.88% bonus for one year](https://media.sailthru.com/composer/images/sailthru-prod-626/plum_122x84.png)
![Includes 0.88% bonus for one year](https://media.sailthru.com/composer/images/sailthru-prod-626/plum_122x84.png)
Cash savings account with 5.17% interest
Includes 0.88% bonus for 1 year
![There are no account fees and free trading of stocks](https://media.sailthru.com/composer/images/sailthru-prod-626/trading%20212%20logo.jpg )
![There are no account fees and free trading of stocks](https://media.sailthru.com/composer/images/sailthru-prod-626/trading%20212%20logo.jpg )
Show free share
![There are no account fees and free trading of stocks](https://media.sailthru.com/composer/images/sailthru-prod-626/trading%20212%20logo.jpg )
![There are no account fees and free trading of stocks](https://media.sailthru.com/composer/images/sailthru-prod-626/trading%20212%20logo.jpg )
Offer free stock
No account fees and free stock trading
Save 5.78%
Save 5.78%
365 day notice account
![BT £50 Reward Card - £30.99 for 24 months](https://sailthru-media.s3.amazonaws.com/composer/images/sailthru-prod-4w5/BT%20new%20logo%20122x84.png)
![BT £50 Reward Card - £30.99 for 24 months](https://sailthru-media.s3.amazonaws.com/composer/images/sailthru-prod-4w5/BT%20new%20logo%20122x84.png)
Fiber broadband
![£50 BT Reward Card - £30.99 for 24 months](https://sailthru-media.s3.amazonaws.com/composer/images/sailthru-prod-4w5/BT%20new%20logo%20122x84.png)
![£50 BT Reward Card - £30.99 for 24 months](https://sailthru-media.s3.amazonaws.com/composer/images/sailthru-prod-4w5/BT%20new%20logo%20122x84.png)
Fiber broadband
£50 BT Reward Card – £30.99 for 24 months
Affiliate links: If you buy a product, This is Money may earn a commission. These deals are selected by our editorial team because we think they are worth highlighting. This does not affect our editorial independence.
Some of the links in this article may be affiliate links. If you click on them we may receive a small commission. This helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not let any commercial relationship influence our editorial independence.