Despite an overall reduction in borrowing costs over the past two years, the 30-year mortgage rate recently moved up from a little above 6% in September 2024 to closer to 7% in January 2025. That contrasts with longer term mortgage rates holding at historically low levels of between 2% and 3% for much of 2020 and 2021.
Market Experts are Divided on Rate Cuts
It predicts five rate cuts in February, March, May, August, and November, resulting in a base rate of around 3.5%. Bank of America also sees the “terminal rate” of 3.5% by early 2026, which implies five rate cuts from the current level.
Projected Interest Rates in the Next Five Years
ING's interest rate predictions indicate that in 2024, rates will start at 4%, with subsequent cuts to 3.75% in the second quarter, 3.5% in the third, and 3.25% in the final quarter. In 2025, ING predicts a further decline to 3%.
The Mortgage Bankers Association (MBA) in its 2025 finance forecast indicates that mortgage rates will gradually slide from 6.6% at the beginning of 2025 to 6.3% through 2026. The National Association of Home Builders is forecasting 6.12% in 2025 and 5.71% in 2026.
Today's rates seem high compared with the recent 2% rates of the pandemic era. But experts say getting below 3% on a 30-year fixed mortgage is unlikely without a severe economic downturn.
As of January 9, 2025, the average rate for a 30-year fixed mortgage is 6.93%, while the 15-year fixed mortgage averaged 6.14%, according to Freddie Mac.
Oxford Economics is predicitng that base rate will eventually fall to 2.5 per cent in 2027 where it will broadly remain throughout 2028 and 2029.
Average personal loan rates started at 11.93% in 2024. Rates were relatively unchanged for most of 2024, ending the year at 12.29%. Personal loan rates may be headed lower in 2025, but you'll need good credit to snag the best rates.
Fannie Mae expects rates to average 6.4% for the year. Wells Fargo projects a slight decline, with rates averaging around 6.3% by the end of the year. Goldman Sachs predicts rates will remain above 6% through 2025.
Borrowers are already benefiting from these popular mortgage deals falling in price since last January when the average two-year fixed rate was 5.93%. Now, in 2025, the typical rate for a two-year fix is 5.48%, according to the latest Moneyfacts mortgage report.
3.4% expected in September. That implies two more 25 basis point cuts from where rates are today. In 2026, the FOMC expects to cut by another 50 bps, to 3.4%.
The 2025 economic forecast is one of modest growth, sticky inflation and higher for longer interest rates. The U.S. economy held strong in 2024, with solid momentum in the stock market, easing inflation and three interest-rate cuts.
"As we look ahead into 2025, lower CD interest rates are a possibility," says Ben Alvarado, executive vice president at California Bank and Trust. After all, the Federal Reserve lowered its benchmark rate three times in 2024, and many analysts expect there to be at least two more Fed rate cuts in 2025.
Last year, the White House projection for bill rates in 2030 was 2.4%. Such a level would be much higher than has been typical since the turn of the century. Three-month bill rates averaged around 1.5% over that period.
The benchmark interest rate in the United States was last recorded at 4.50 percent. Interest Rate in the United States averaged 5.42 percent from 1971 until 2024, reaching an all time high of 20.00 percent in March of 1980 and a record low of 0.25 percent in December of 2008.
Some economists are projecting three rate cuts this year, including Goldman Sachs, whose economists expect rates to end 2025 in the range of 3.5% to 3.75%, down from its current range of 4.25% to 4.5%.
Whereas previously the ESR Group had expected mortgage rates to dip below 6 percent in early 2025, the revised forecast now shows mortgage rates ending 2025 at 6.3 percent and remaining above 6 percent through 2026.
So in 2025, expect modest declines in rates for mortgages, auto loans and credit cards, according to Bankrate's chief financial analyst Greg McBride. “Even with those declines, we're not going back to a low-rate environment,” McBride said. “We're going from a high-rate environment to not as high.
These futures can also be short-term or long-term. Short-term interest rate futures have an underlying instrument with a maturity of less than one year, while long-term interest rate futures have an underlying instrument with a maturity of over one year.
MBA: Rates Will Stay Above 6.3% in 2025. The Mortgage Bankers Association predicts in its Mortgage Finance Forecast that mortgage rates will gradually slide from 6.6% at the beginning of 2025 to 6.3% throughout 2026.
To qualify for an FHA loan in California borrowers need to have a minimum mortgage specific credit score of 580. A credit score of 580 can qualify you for a 3.5% down payment.
Today's national 15-year mortgage rate trends
The national average 15-year fixed refinance interest rate is 6.37%, up compared to last week's rate of 6.33%. Typically, 15-year mortgage rates are lower than rates on the more popular 30-year loans.
Why mortgage rates won't drop to 2% again. Again, when mortgage rates hit record lows early in the pandemic, the federal funds rate was near zero. Barring another major economic shock, the Fed projects that the federal funds rate will only take modest adjustments downward over the next several years.