Martin Lewis: Energy price cap now due to rise by a 'horrendous' 40%+ in April
The energy price cap is now expected to rise by over 40% next April, MoneySavingExpert.com founder Martin Lewis warned in the latest episode of The Martin Lewis Money Show. But despite the "horrendous" projected increase, Martin explained that households are still likely to be better off "doing nothing" for now, given how expensive the cheapest fixed tariffs are currently.
The clip above has been taken from The Martin Lewis Money Show on Thursday 2 December 2021, with the permission of ITV Studios. All rights reserved. You can turn on subtitles by selecting the keyboard image at the bottom right of the video. You can also watch the full episode on the ITV Hub
Expect a 'horrendous' energy price cap rise in April - but it's likely to still be cheaper compared to fixing
Martin explained that before this week we were expecting energy regulator Ofgem's price cap to rise to £1,660/yr on typical use in April 2022. But now, new figures from one analyst say it will be at least £1,700/yr, while others predict it will be £1,827/yr - over 40% more than its current £1,277/yr level.
The next price cap is currently due to be based on wholesale prices between the end of July this year, and the end of January 2022.
Martin said: "It’s a horrendous rise, but this is the thing you need to think about: compare it to the cheapest fix." He explained that by sticking with your current deal, you should save until April compared to taking out a new fix now, and when prices go up then, you'll likely still be paying less compared to the cheapest fix you can get now.
However, Martin did stress that this was only his best guess now and it's impossible to know for certain what will happen without a crystal ball.
There are NO deals meaningfully cheaper than the price cap right now
Martin also explained that while a year ago he would have told people to avoid the price cap on standard variable tariffs, as it was significantly more expensive than the cheapest fixed deals, this is no longer the case.
In November 2020, the cheapest fix was around £830/yr for typical use. In comparison, because of extreme energy price hikes, the cheapest fix typical energy users can get today stands at £1,730/yr. Martin explained: "So that is over double the amount that you would have paid a year ago. A huge and phenomenal increase."
Since news of the energy crisis broke, which has seen 23 energy firms go bust since September, Martin has repeatedly told households to "do nothing" and to go onto Ofgem's price cap when their fixed deal ends or, to stick with it if they were already on it, and his message remained the same in this week's episode.
Martin said: "Because the price cap moves every six months, and is now based on a time lag, it is now the cheapest, meaningful tariff you can get." By sticking with the energy price cap, households with typical usage can expect to pay less than the current cheapest fix.
Addressing audience members, Martin asked: "So what would you do?" His response: "Do nothing."