Fix for 1 year or 2?

Yellow_mango

My current fix is due to come to an end in June. Looking at rates to move onto with my current provider (Shell) both one year and 2 year fixes are substantially lower than my current rate. 

Whilst obviously no one has a crystal ball on energy prices, I was wondering what others are thinking. My inclination is that prices are probably quite low right now so it might be worth paying a little extra to fix for 2 years. 

Is anyone else making this decision at the moment? What are you doing?

[I know I can also look at other providers. The question would remain regardless of provider. I have got some other quotes but none were significantly cheaper and I’m quite happy with my current set up]. 

MWT

One of the reasons I stay with my current provider, Octopus, is that they have no exit fees even on the fixed tariffs, so you can lock in the rate for 12 months and if they offer a new cheaper tariff you can switch to it at any time.

That way you get the benefit of 12 months protection against price rises with the potential to go lower if the price falls.

Right now I've seen a few signs that the month on month falls may have stopped with a few small increases so it is probably a good time to fix, but for how long is anyone's guess, fortunately for me, I don't have to guess.

Yellow_mango

The ability to switch tariff without exit fees allows you to take advantage of future falls, but does not protect against rises at the end of the 12m fix. 

I know of course that trying to gamble on energy prices in 12m time is hopeless and I’m probably overthinking!

[Deleted User]

If you are happy with the new price and would not be bothered if prices came down then fix for 2 years. If you see the prices falling and would be furious that you’d fixed for 2 years then do one year. It mainly depends on your attitude to the energy market.

MWT

Yellow_mango said:

I know of course that trying to gamble on energy prices in 12m time is hopeless and I’m probably overthinking!

Exactly, whatever period you choose offers no protection against price rises at the end of the period and the longer you try to lock in the more you pay for the uncertainty factor.

The bit I like about being able to freely jump to another cheaper fixed tariff is that it restarts the 12 month period again, but yes, if there are no cheaper options during the period it will go up at the end, but during that 12 months you can always choose to change anyway to refix for 12 months at perhaps a slightly higher price if you believe that further rises are on the way...

A more sophisticated option is to consider a tracker tariff that follows the wholesale prices but will usually always undercut the prices being offered for fixed tariffs at that time...

Yellow_mango

Thank you! 

I’m generally one to pick what I think is the best deal then just leave it to it rather than obsessing afterwards. So a 2 year fix is quite attractive from the not needing to think about it again for 2 years perspective too. 

Though I have to say the idea of a tracker appeals quite a lot. I think I’ll have a closer look at Octopus. Especially if my current smart meter is compatible. 

MWT

Yellow_mango said:

Though I have to say the idea of a tracker appeals quite a lot. I think I’ll have a closer look at Octopus. Especially if my current smart meter is compatible. 

The tracker tariff doesn't actually require a smart meter.

I'd say it is better with one as the daily consumption will be precise, but if your smart meter isn't compatible or for those who don't have a smart meter they will apportion your actual use through the month according to an 'industry coefficient', so not just dividing by the number of days.