Copy article

Energy price cap to rise by 2% in yet "another burden on households"

ended 27. August 2025

ENERGY prices in the UK are rising once again by 2% from October in yet “another burden on households” that is “bad news for borrowers”, experts warned.

From 1 October to 31 December 2025 the price for energy for a typical household who use electricity and gas and pay by Direct Debit will go up by 2% to £1,755 per year, energy industry regulator Ofgem announced today. 

However, compared to the start of 2023, this is £625 (26.3%) lower than when the energy crisis was at its peak.

For a typical household, their energy bills will increase by £2.93 a month or £35.14 per year. 

This is 2.2% per year higher than the price cap set for the same period last year, from 1 October to 31 December 2024 (£1,717).   

But when adjusted for inflation, it is 0.9% lower than the same period in 2024.

Based on the current inflation rate, a typical household will pay £102 from October to December instead of £100 per month.

Chris Barry, Director at London-based Thomas Legal, said: “This could be bad news for mortgage borrowers. We need inflation to reduce by quite some margin if we are to see a future reduction in the base rate. 

"With energy prices back on the rise, the overall inflation figure is less likely to come down and that will undoubtedly result in higher interest rates for longer.

"The UK economy isn’t growing as expected and this added strain on household finances will only make it harder for people to find spare cash to help local businesses.”

Philly Ponniah, Chartered Wealth Manager and Financial Coach at Philly Financial, warned that the burden on households is rising yet again.

She said: "A 2% rise sounds small in isolation, but for families already juggling increased food, mortgage and childcare costs, it adds to the squeeze. Inflation may have technically eased, but wages and savings haven’t stretched in the same way, so every extra pound a month is felt. 

"We may be well off the crisis peak but psychologically this rise will seem like another burden on households."

David Belle, Founder and Trader at Fink Money, questioned why the cap is rising despite wholesale prices being low in the UK.

He said: "This doesn't make sense. OFGEM looks at the previous 3-month period of electricity prices, so the price is based on Feb-May's cost of electricity. The high in UK wholesale electricity prices in Feb was £114MWh. 

"It is now £77.76MWh and has been around this price (and lower) since June. That's therefore a decline of about 33%. Why then is there a 2% rise in the cap? 

“If they're forecasting based on the future price being higher for winter, why then do they use a backwards looking methodology all other times?”

Benjamin Beck, Money Coach at Beck Money Coach, added: “Whilst this price cap increase isn’t a welcome increase, at least it isn't eye-watering. We all need heating and electricity to live our day to day lives and there are steps you can take to control this spending. Now is the time to shop around for deals if you are close to the end of a fixed deal.”

8 responses from the Newspage community

Copy all

Star Quote
Copy

Editor
Chris Barry
Director at Thomas Legal
This could be bad news for mortgage borrowers. We need inflation to reduce by quite some margin if we are to see a future reduction in the base rate. With energy prices back on the rise, the overall inflation figure is less likely to come down and that will undoubtedly result in higher interest rates for longer. The UK economy isn’t growing as expected and this added strain on household finances will only make it harder for people to find spare cash to help local businesses.
Star Quote
Copy

Editor
Philly Ponniah
Chartered Wealth Manager and Financial Coach at Philly Financial
A 2% rise sounds small in isolation, but for families already juggling increased food, mortgage and childcare costs, it adds to the squeeze. Inflation may have technically eased, but wages and savings haven’t stretched in the same way, so every extra pound a month is felt. We may be well off the crisis peak but psychologically this rise will seem like another burden on households.
Copy

Editor
Samuel Mather-Holgate
Managing Director & IFA at Mather and Murray Financial
Energy prices are to be hiked more than expected, meaning a hard winter, especially for those still trying to pay off energy debt accrued during the period of maximum bills a couple of years ago. Finally some competition might return to the market, and now could be a great time to jump on a price comparison site to lock in a cheaper fixed rate deal.
Copy

Editor
Daniel Hobbs
CEO at New Leaf Distribution
The 2% rise of £35 on average per household might be seen as a modest increase by regulators but the reality is many homeowners are on variable rates with estimated usage payments and monthly direct debits can vary wildly.

I can see homeowners and particularly borrowers rolling off on to new potentially higher mortgage rates see this as another affront on their finances which is mainly the result of bad decisions by our incumbent governments over the past 5 years.
Copy

Premium
David Belle
Founder and Trader at Fink Money
This doesn't make sense. OFGEM looks at the previous 3-month period of electricity prices, so the price is based on Feb-May's cost of electricity. The high in UK wholesale electricity prices in Feb was £114MWh. It is now £77.76MWh and has been around this price (and lower) since June. That's therefore a decline of about 33%. Why then is there a 2% rise in the cap? If they're forecasting based on the future price being higher for winter, why then do they use a backwards looking methodology all other times?
Copy

Benjamin Beck
Money Coach at Beck Money Coach
Whilst this price cap increase isn’t a welcome increase, at least it isn't eye-watering. We all need heating and electricity to live our day to day lives and there are steps you can take to control this spending. Now is the time to shop around for deals if you are close to the end of a fixed deal.
Copy

Jonathan Moser
CEO at Mo'Living
As a serviced accommodation provider offering all-inclusive stays, any rise in energy costs directly impacts our bottom line, as we absorb these increases rather than pass them to guests mid-booking. A 2% rise may seem small for a household, but across multiple properties it compounds significantly, especially when we maintain consistent comfort levels year-round. Unlike typical households, we can’t offset usage by reducing heating or hot water without affecting guest experience. While prices are lower than the 2023 peak, the cumulative effect of smaller rises still challenges our ability to keep rates competitive while maintaining high service standards.

Copy

Graham Wells
Founder and Financial Coach at GroWiser Financial Coaching
It can be hard to understand why the energy price cap is increasing when oil prices have been falling. But rather than fretting about the complexities of the energy supply chain, which you can't control, focus on your own cashflow. By setting up a monthly spending plan (and sticking to it) you can build in some wiggle-room for price increases that are beyond your control. In the same way that an emergency fund can soften the blow for one-off unexpected bills, over-budgeting for regular family expenses will pay dividends. It might sound impossible, but in the vast majority of household budgets I've seen, there are opportunities to streamline costs. Making changes to your budgeting regime can take a bit of time and effort, but it's well worth it if you can deal with price rises like this in your stride.