Households are being urged to act before July’s energy price rise takes effect, as new research suggests millions have little or no cushion against another increase in essential bills.
Ofgem’s price cap will rise by 13 per cent from 1 July, taking a typical annual dual-fuel bill from £1,641 to £1,862 under the regulator’s existing measure of typical use. That is an increase of around £18 a month for an average household paying by direct debit, if the level were sustained for a year.
The rise comes as research from Compare the Market suggests 22 per cent of people have no savings at all, while many others have far less set aside than the unexpected costs they may face.
Almost seven in 10 adults have faced a significant surprise expense, according to the research, with average emergency savings falling £7,443 short of the average large unexpected bill.
Clare Stinton, senior personal finance analyst at Hargreaves Lansdown, said: “It is lower-income households who will be most vulnerable to the hike in energy costs headed for us this July. This is due to essential costs making up a much bigger proportion of their monthly outgoings, meaning there is less headroom for change in their budget.”
Why the price cap is rising
The price cap affects households on standard variable tariffs, rather than those on fixed deals.
Ofgem said the increase reflects higher wholesale gas prices, linked to continued volatility in global energy markets.
The regular added 40 per cent of accounts are on fixed tariffs and will not be affected by the July cap rise.
Households on standard tariffs, or those whose fixed deals are ending soon, now have a short window to check whether they can cut costs before bills increase.
Should you fix your energy tariff?
A fixed tariff can protect you from July’s rise, but it is not automatically the right option for everyone.
Andrew Capstick, utilities editor at MoneySavingExpert, says: “If you’re on your provider’s standard tariff, which most households are, your prices are controlled by the Price Cap, which we know will rise by 13 per cent on 1 July.
“Right now, some of the cheapest fixes are below today’s Price Cap rates. That means fixing could cut costs now and protect you from the upcoming July hikes.
“The key is to compare deals using a whole-of-market comparison tool – like MoneySavingExpert’s Cheap Energy Club to find the best deal for your usage and region.”
It’s also worth checking for exit fees. Variable tariffs usually have no exit fee, but fixed deals may charge one. Suppliers cannot charge an exit fee if you are in the last 49 days of your deal.
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