The average household will see their energy bills frozen at £2,500 a year until October 2024.

Energy prices for households will be frozen until October 2024, the government announced today.

The move, under which the combined gas and electricity bill for the typical household will be held at £2,500 a year, will protect people from further spiralling energy costs.

The average household is currently paying £1,971 in energy bills, but that figure was set to soar to £3,459 from October 1, while analysts had warned it could rise to more than £5,000 from January.

Today’s announcement will save the typical household just under £1,000 a year, but energy bills will still be double the level they were at the beginning of 2022.

Those who heat their home using oil, as well as people living in Park Homes or on heat networks, will receive equivalent support.

The energy price freeze was welcomed by consumer groups, but some warned that many people were already facing fuel poverty when average annual bills were at a lower rate of £1,971.

What are the details?

Under the terms of the energy price freeze, the maximum amount power companies can charge customers per unit of energy used will be capped until October 2024.

As companies are currently paying significantly more than this level for power on the wholesale markets, the difference in price will be covered by the government.

While the average household will see their bill frozen at £2,500, the actual level of bills will vary from household to household depending on how much power they use, with some paying more than this amount and some paying less.

Consumers do not have to do anything to benefit from the price freeze, as it will be automatically passed on by their supplier.

It is estimated that the scheme will cost the government around £150 billion over the two years.

How will the price freeze impact the housing market?

Soaring energy prices as a result of the conflict in Ukraine have been a major factor in pushing inflation higher.

Inflation as measured by the Consumer Prices Index – which tracks the rate at which the cost of goods and services frequently bought by consumers are increasing – hit a new 40-year high of 10.1% in July.

The Bank of England has been aggressively hiking interest rates since the end of last year in a bid to bring down inflation, which it is supposed to keep at around 2%.

Before today, there had been warnings that inflation was set to rise to 13% by October, with some economists predicting it could hit 18% or even 22% next year if the government did not take steps to tackle the energy crisis.

Today’s news means inflation is likely to peak sooner than previously expected at around 11.5% in November.

It is also good news for the housing market.

Our latest House Price Index showed that demand was beginning to cool in the face of rising mortgage rates, the cost-of-living crisis and general economic uncertainty.

The energy price freeze will provide some relief to those worried about facing a sharp rise in their bills from October, helping to support demand.

But it is unlikely to be enough to reverse the current slowdown.

What should I do if I am struggling to pay my bills?

If you are already struggling to pay your energy bills or are worried you might run into difficulties, make sure you are claiming any support that is available to you.

A number of the major energy companies offer grants to help people falling behind with their fuel bills, including British Gas, which offers up to £1,500 for individuals and families who are in energy debt regardless of who their supplier is.

In March this year, the government announced that every household would have £400 cut from their energy bills, with low-income households, pensioners and people with disabilities receiving up to £800 off.

In addition, pensioners will receive an additional £300 Cost of Living Payment, while people with disabilities will receive £150.

Support is also available through the Household Support Fund and the Warm Home Discount Scheme.

If you do fall behind, it is important to contact your supplier as soon as possible. Ofgem has rules that they must help you if you can’t afford your energy bill, and they should work with you to create an affordable payment plan.

There are also a number of steps you can take to reduce your gas and electricity consumption, such as turning your thermostat down, taking shorter showers, draft-proofing your windows and doors, not using a tumble drier and turning off appliances left on standby mode.

Key takeaways

  • Energy bills will be frozen at an average of £2,500 a year until October 2024
  • The move will save the typical household just under £1,000 a year, but bills will still be double the level they were at the beginning of 2022
  • Those who heat their home using oil, as well as people living in Park Homes or on heat networks, will receive equivalent support