Does this sound sensible to fix?

Tailender_Investor

So I know Martin’s current advice is it could be sensible to fix at around 18-20% above the current cap. British Gas are offering me this and I’m tempted to fix. 

I use electric only, no gas in the village I live. I have an air source heat pump for heating so naturally I use more electric in the winter due to heating. 

I use around 350 kWh per month on average but due to heating etc it’s normally around 200 per month in the summer and 500 in the winter. 

Current price cap rates are 29.24 per kWh and 37.91p standing charge. 

Fix on offer is 34.58p per kWh and 43.39p standing charge. 

Obviously by fixing I’ll be paying more now but my usage is lower now and potentially saving when I use more in the winter. 

Of course we don’t know October price cap yet but current predications are for a 25-30% raise so I could maybe save 5-10% if that happens. If the price cap is lower then I could be on more, my crystal ball isn’t working at the minute. Exit fee is £75

Am I missing anything obvious? Can’t anyone convince me not to fix? 

BUFF

how long is the tariff for?

Tailender_Investor

12 months. 

Mstty

Due to your split in usage and the likelyhood of the rise in October it might be worth it to lock yourself in knowing what you will pay rather than the unknown.

This will be a personal choice stick or twist

Mstty

To add if we hadn't fixed in March we would definitely go for that deal now.

victor2

Few assumptions to be made and still a gamble but some arithmetic shows:

Annual cost now £1,366

Annual cost on new fix £1,611

You use 3000kWh in the 6 "winter" months and 1200kWh in the 6 "summer" months

You would pay £494 on the new fix for the summer months (starting in April) versus £420 at the current rates.

The winter months would cost £947 on the new fix, but £1,231 if the current rates increase by 30% in October (and October is the start of your 6 winter months)

These prices assume VAT is included in the rates you indicated.

That was the spreadsheet equivalent of back-of-a-fag-packet, and I'm happy to be corrected, but it should be in the ball park!

Edit: Forgot to add the net result! a saving of £210 if you take the fix now AND the current rates increase by 30% in October. You'd need at least an 8% increase to break even.

Tailender_Investor

Thanks Victor, very useful. 

Our heating does normally come on around October although naturally does depend on the weather, think I managed to drag it out until November last year. 

Just to confirm you mean an 8% raise on top of the fix rate? So around 26% from the current cap?

victor2

Tailender_Investor said:

Thanks Victor, very useful. 

Our heating does normally come on around October although naturally does depend on the weather, think I managed to drag it out until November last year. 

Just to confirm you mean an 8% raise on top of the fix rate? So around 26% from the current cap?

No, that's 8% on the current cap rates you quoted in your original post, so not a very big increase.

pochase

victor2 said:

Tailender_Investor said:

Thanks Victor, very useful. 

Our heating does normally come on around October although naturally does depend on the weather, think I managed to drag it out until November last year. 

Just to confirm you mean an 8% raise on top of the fix rate? So around 26% from the current cap?

No, that's 8% on the current cap rates you quoted in your original post, so not a very big increase.

I think you are missing a 1, it is 18.26% more expensive.

Tailender_Investor

Yes the fix is 18% more expensive than my current rate. 

But I think due to the nature of my split usage with electric heating as I use more in the winter the price only needs to increase 8% to breakeven. 

pochase

Tailender_Investor said:

Yes the fix is 18% more expensive than my current rate. 

But I think due to the nature of my split usage with electric heating as I use more in the winter the price only needs to increase 8% to breakeven. 

You are very near the correct number, just one error with it. You seem to be calculating the increase based on the fixed rate, but you need to calculate based on SVT. So it will be more like the 18% plus the 8% = 26%

Based on your figures you will pay £64.08 more in the first 6 months (1200KWh * 5.34p). 5.34 is the difference between fix and SVT.

This £64.08 you need to make up in the second half of the year, where you are using 3000KWh, so divide 64.08 by 3000, and you know the new SVT needs to be 2.14p more expensive than your fixed rate.

Now add the 5.34 to the 2.14 = 7.48p, and you know by what the SVT needs to increase by to break even.

7.48p increase of the 29.24p current SVT to the new SVT of 36.72 needed to break even  works out to an 25.58% increase of the electricity rate.