What are your thoughts on whether to fix/cap now?

Clariman

Is there a board consensus of whether going for a fixed or capped deal just now is worth it? I guess it depends on whether the wholesale prices for gas and electricity are likely to continue rising or not. For an extra few pounds a month I can cap and get boiler servicing etc included for 3 years.

What are your thoughts?

Thanks
Clariman

Yellowcard

Everyones different, some like the piece of mind, some like immediate savings.

Cardew

That question has been debated many times on this Board over the years.

I think it is fair to say that years ago virtually all the fixed/capped rate deals turned out to be a good choice as the 'premium' was low. However the premium on some long term tariffs introduced in the past couple of years has been high, and they look like being a poor investment.

The latest ploy seems to be a capped deal(with penalties for early termination) that are introduced way below the Standard Tariff charges with the 'cap' being that they will always be, say 2% below standard rate. So if they are, say, 15% lower than Standard tariff when introduced, they can increase prices by 13% and still meet the conditions of the capped deal.

Who will win the 2:30 at Kempton park!!

JJ_Egan

You need to work out the difference in what other tariff you can get based on a years usage .
See if the difference is then going to cover a further price rise or not or at least how much it will cost to lock to fixed price .

jje

backfoot

Given the current ridiculously high premiums to online rates and short contract periods, they are generally a very costly choice.

Remember until the price rises,you are paying this full premium. After it rises,you may still be paying a premium.

bondy01

Was thinking about starting a thread about this. I'm now on standard with EDF. Their fixed product is over a £100 cheaper whilst online V9 is another £30-40 cheaper. Can't see V9 staying the same until end March 2012 unlike the fixed product so I'm thinking of fixing for the first time ever. Prices are only going one way , especially with the turmoil at the moment. That's my opinion............

DirectDebacle

I think it is too subjective to say whether it is good or bad. On price alone not a good call but then those who consider fixing will consider factors in addition to price.

I have just come off a fixed price and seriously considering EDF 2015 fixed. I have no idea where prices will be in June this year let alone June 2015, when it comes to an end. I expect they will be higher.

Will I have paid more than by switching every year or less? If so by how much. It is a gamble.

Assuming no change to my usage then I can be certain of my prices, little tampering with the DD etc. The graph is not smooth but prices only go one way. See here.

http://www.simplyswitch.com/energy/switchingguide/energypricerisetable.aspx

Lots to ponder.

backfoot

bondy01 wrote: »

Was thinking about starting a thread about this. I'm now on standard with EDF. Their fixed product is over a £100 cheaper whilst online V9 is another £30-40 cheaper. Can't see V9 staying the same until end March 2012 unlike the fixed product so I'm thinking of fixing for the first time ever. Prices are only going one way , especially with the turmoil at the moment. That's my opinion............

You don't say what your base level annual charge is. The premium costs to fix (presumably annual) need to be expressed against that to see if the percentage is reasonable or not.

Cardew

DirectDebacle wrote: »

I have just come off a fixed price and seriously considering EDF 2015 fixed.

I looked at that tariff, but was astounded to see how much more electricity cost on that tariff in my area(Midlands) - up to 20%+ more than other regions.

bondy01

backfoot wrote: »

You don't say what your base level annual charge is. The premium costs to fix (presumably annual) need to be expressed against that to see if the percentage is reasonable or not.

The standard that EDF moves customers to after so long works out at £1038 for 4000kWh elec and 14000kWh gas in the Yorkshire region. Cheapest at the moment is BG at £858. Cheapest with EDF is now V9 at £886. The fix option with EDF until end March 2012 comes in at £923 (npower have a fix option at £903). EDF also do fixes until 2013 and 2015 which according to the EDF site would cost the same as my current standard tariff. Just off to do the maths. All of these come with as usual early exit penalties. I can't see V9 being it's current price for the next 13 months so the £37 gap will get narrowed. What does worry me is the talk of oil reaching dizzy heights (160 dollars has been mentioned) which could have a massive effect on energy prices. But I could be wrong (as usual).....

DirectDebacle

Cardew wrote: »

I looked at that tariff, but was astounded to see how much more electricity cost on that tariff in my area(Midlands) - up to 20%+ more than other regions.

Yes, it comes with a premium and at first glance will put many off.

However it is a fix over a 4+ year period and may or may not be more expensive than switching every year (or less) over that time frame.

The other thing to consider is inflation. If it continues at the current 4-5% then the payments will become effectively less of a cost, even if wage inflation is below RPI/CPI.

I anticipate that energy prices will at the very minimum keep pace with inflation.

As has been mentioned the surprising events in the middle east if they continue to push up oil prices, will put additional pressure on energy prices. I wouldn't be surprised to see some upward movement in prices for domestic customers this coming summer.

A lot to consider but at the moment I am thinking that, despite the high premium, it may not be a bad bet. Under my particular circumstances it is a priority to be able to plan my expenditure as far in as advance is possible. As far as energy goes a fixed price is good in that respect, but it has to be balanced against the initial premium which could well have an effect 2 or 3 years into the term.

You pays your money and you takes your choice.

I am not advocating a fixed price over any other deal, just that it is worth looking at beyond the initial premium.

There is always a risk. Those who took out a fixed rate mortgage in 2007 @ 5.5% ish have probably regretted it.