Early Exit Fees Title - Should You Switch Gas & Electricity Supplier?

Early Exit Fees – Should You Switch Gas & Electricity Supplier?

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When most of us come to the end of our Gas and Electricity fixed rate deal, we search the market to find the best deals available. Sometimes these deals come with early exit fees attached, often up to £60 for dual fuel tariffs.

So, when we sign up to these deals, we conclude that we’d be crazy to consider switching again before your current deal comes to an end, right?

While this could be correct most of the time, there may be occasions where it might make sense to pay the early exit fee on your energy deal and move to a new supplier.

Let’s consider when this might be true.

Should You Pay an Energy Early Exit Fee?

Nobody likes to pay an early exit fee. It feels like you’re just throwing money down the drain, doesn’t it? What, though, if paying the fee could actually enable you to save money in the long run?

This might be the case if there is a steep rise in energy prices over a short period of time.

Recently, for example, there has been a steep rise in the cost of wholesale energy prices paid by UK suppliers. This has even led to Ofgem having to raise a recently imposed cap on energy prices by around 10% starting in April.

If costs continue to rise in the wholesale markets due to depleted wholesale gas supplies in the coming months, then this could mean that you will be paying a lot more for a new fixed rate deal in a few months time than you would right now.

When it Might Be Worth It

As an example, let’s say that you could secure an energy deal today which means you would pay around £1,200 for your Gas and Electricity over the next 12 months. Let’s then imagine that in three months time prices rise by 10%. This could result in you paying £1,320 over the year for your fixed rate deal.

In the above case, we can see that taking a hit of £60 might actually result in you saving money. Not only this, but you would be safe in the knowledge that your payments will remain the same for the next 12 months.

While it’s true that you might lose out if prices don’t rise, you could equally be even better off if prices were to go up by more than 10%. This might sound a little unreasonable, but it might not be so crazy.

What if we were to have another ‘Beast from the East’ style event in March, for example? Especially while wholesale supplies are already depleted? It’s easy to see how this might push prices up further. It might even create the perfect storm for energy prices, just when you are looking for a new fixed rate energy deal.

Early Exit Fees - Should you switch energy supplier?

Weigh up the Pros and Cons

To be clear, I’m not saying that everyone should go out and switch energy supplier tomorrow. What I am saying is that paying an early exit fee on your energy deal might not always be so crazy. If you feel that it might save you money in the long run, then it can sometimes make sense. If you are considering doing this, do your best to weigh up the potential pros and cons and then make an informed financial decision.

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