Fix or gamble: what to do with your mortgage, energy and savings deals

Is now the time to lock into a fixed deal on your savings and bills, or should you take a chance and hold off?

With money tight for most of us, getting the best deal could be more important than ever.

Granted, we have little wiggle room with outgoings such as Council Tax, where hikes are simply imposed on us.

But with bills such as your mortgage or energy tariff, you have some say over the deal you sign up for and what it’s likely to cost.

In this article, we explore three ways you can take a hard look at your finances.

You can then weigh up if it’s the right time to take a fixed deal or bet that more prosperous times are on the horizon and wait it out for a better offer.

Fix or gamble: your energy tariff

According to most analysts, we’re likely to see another spike in the Energy Price Cap in October – this is the maximum providers can charge per unit of energy.

However, there is still debate over the size of the potential rise.

E.on predicts an average annual bill of £1,748, EDF expects an even bigger increase of £44 to £1,764, and British Gas thinks the annual increase will be £45.

Low-cost ways to save energy and cut your bills

The benefits of fixed tariffs

Historically, a fixed energy tariff has been a smart way to keep your gas and electricity bills low.

These deals lock in how much you would pay for a set period and often work out cheaper than the standard variable rate (SVR) tariffs that households are shunted onto at the end of that initial fixed period.

That said, things have changed somewhat over the past few years.

As regulator Ofgem issued rulings forbidding energy companies from offering their best deals to new customers, competition effectively went out of the window.

Luckily, it seems things are looking up.

In fact, there are now a fair few attractive fixed deals entering the market.

At present, Outfox Energy is offering 14.9% below the current Price Cap, while Tulo Energy’s deal is 14.3% less.

The final verdict

Of course, none of us has a crystal ball when it comes to energy prices.

However, given how much cheaper fixed-rate deals currently are, it would require a significant - and highly unlikely - drop in energy prices to leave those on a fixed-rate tariff worse off.

Consider fixing your energy today: you can find a cheaper deal with Uswitch (opens in new page)

PROMOTION

Fix or gamble: your mortgage 

One of the biggest decisions all homeowners will ever face is how to handle the interest rate on their mortgage.

And your choice may well be tied to the Bank of England Base Rate – the benchmark that affects borrowing costs for many mortgages and loans.

At its latest meeting, the Bank decided to keep rates at 4.25% but hinted future cuts were on the cards.

Should I fix?

Unlike with energy, this situation is less clear-cut.

The right choice for you will inevitably depend on your financial circumstances.

Going for a fixed rate offers greater security ‒ you're reassured that your interest rate won’t move for the duration of your allotted period.

Likewise, you have the certainty of knowing what your monthly repayments will be.

This is obviously extremely useful when it comes to budgeting, especially during a cost-of-living crisis.

The benefits of variable deals

However, the certainty of a fixed-rate mortgage comes at a price ‒ the interest rate is usually higher than what you can get on a variable rate.

If you want to pay as little as possible, are happy to take a bit of a risk, or you think that the Base Rate will remain at its current level ‒ or even fall ‒ then a variable mortgage is worth considering.

It’s also important to bear in mind that variable mortgages come in different forms.

While some move directly in line with the Base Rate, others are at the whim of your lender. 

Fix or gamble: your savings pot

As loveMONEY has previously reported, the Bank of England has cut the Base Rate several times since August 2024.

This means it’s becoming more difficult to find a decent home for our savings, as a falling Base Rate tends to result in less attractive offers for savers.

Should I fix?

Opting for a fixed rate means giving up access to your cash for a set period, so whether it makes sense for you will depend not only on the rate on offer but also on how likely you are to need access in the months ahead.

At present, Oxbury Bank offers the top fixed rate of 4.48%, although this is just for six months.

If you’d like to fix for longer, Birmingham Bank pays 4.47% for five years.

Or should I take my chances on a variable rate?

Playing devil’s advocate, what looks like an appealing rate today might start to seem less impressive in a few months.

This can increase the lure of an easy-access product, allowing you to shift your funds with ease.

Note, however, these deals usually offer an introductory bonus – after which the rate plummets.

For example, investment platform Plum currently pays 4.85% on its instant access Cash ISA, which comes with a 0.76% bonus for the first 12 months.

Best of both worlds?

If anything, combining variable and fixed rates may be the way to go ‒ keeping some cash in an easy access variable account for emergencies and locking other money up in short-term fixed-rate bonds.

Then, you'll have the security of a fix but can access your funds in the event of an unexpected expense.