What is the Probability of Energy Prices Coming Down?

In the wake of recent announcements about price hikes on both gas and electrical supplies, fixed rate plans can seem very tempting. The idea of getting one over on the energy suppliers surely must put a smile on the face of many a consumer, but are fixed rate deals al they're cracked up to be? What's the truth?  We investigate the pros and cons of entering into one of these agreements.

Crystal Ball Job

By far the biggest advantage of these contracts is the ability to foresee exactly what your expenditure will be for the duration of the deal. No shocks, no nasty surprises. When the six o'clock news threatens to put the nation off its spaghetti Bolognese with doom about further price hoists, the fixed rate customer can munch on with a satisfied smile.

What is the Probability of Energy Prices Coming Down?

On a fixed rate you know what your energy will cost and have the assurance the price will not fluctuate from this until you reach the end of the term agreed.  This can seem an attractive proposition given the fact most of Britain has to find on average an extra £80 to spend on next years fuel bills.  With unemployment numbers rising, petrol and food prices all stinging our pockets, this transparency makes a welcome change.

Fixed rate tariffs can offer up to 15% discounts on standard online tariffs available and when every penny counts that adds up to serious cash.  Be aware though, to benefit from the peace of mind a fixed rate offers you will pay a built in premium.  In fact many of these deals end up being considerably more expensive than some variable discounted rates on the market.

One Way Price Changes?

It is pretty easy to be scared into the belief that energy prices will only go up, but of course they can come down too, which is a consideration here. Signing up to a fixed term rate is a gamble which could save you a good deal of money in the short term but turn out to be an expensive purchase gone wrong should prices drop. In the advent of rate decreases customers who have signed up to fixed rates will not enjoy the lower prices, their rates remain painfully static.

Price Cap Instead?

 It is worth pointing out at this point the difference between a fixed rate agreement and the well promoted price capping deals which we were all urged to enter into last year.  With a capped price rates cannot go higher than the agreed number but happily they can go down. 

Small Print

Like every agreement the true price of these deals is potentially well hidden in the small print.  Often there are hefty penalties for breaking fixed rate contracts.  The importance of investigating and ruminating on future possibilities for your household is extremely important.  Very careful consideration should be taken about how easy it will be to maintain the payments in the future.

When the British Gas prices escalated by a massive 6%, a million of their customers will be shaking their heads saying “I told you so”.  Their gamble has paid off very nicely thank you very much. Should the energy companies finally decide to pass on wholesale energy prices decreases to their customers, they may not look so smug. For the moment though, they are sitting pretty and if situations remain as they are they could end up having paid a great deal less than the rest of us for their fuel.

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