Despite an overall reduction in borrowing costs over the past two years, the 30-year mortgage rate recently moving up from a little over 6% in September 2024 to closer to 7% in January 2025.
According to BlackRock's analysts , in 2025, the Fed will likely reduce rates further to around 4% and then pause, depending on inflation and labor market data. BlackRock highlighted the Fed's Summary of Economic Projections (SEP) , which suggests a potential range for the federal funds rate between 3.75% and 4%.
Expert Projections of Interest Rates in the Next Few Years
2025: 3.4% 2026: 2.9% 2027: 2.9% (according to Federal Reserve Bank members and presidents, the median projection for rates after 2026 is 2.8% with a range of 2.4% to 4.9%)
Bankrate's key CD insights and 2025 forecast
McBride predicts that by the end of 2025, the national average APYs for 1-year and 5-year CDs will be 1.25% and 1.35%, respectively. By year's end, top-yielding 1-year CDs will earn 3.70% APY, while top 5-year CDs will earn 3.95% APY, according to McBride.
Yes, you can get 6% on a CD now. As of January 10, 2025, the Financial Partners Credit Union is offering 6.00% APY on their CD rates for 8 months. The minimum deposit is $1,000.00, up to a $5,000 maximum. Check out the latest CD rates from over 400 banks and credit unions.
Should I open a CD now or wait? It might be a good idea to get a CD now, since rates are expected to drop in the future. "If they want to get in the market for a CD, now might be the better time to lock in that higher yield, so they're shielded — at least for the near term — as rates continue to drop," says Stroup.
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.
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.
While used car rates might remain slightly higher, averaging around 10%, the overall trend is positive. This decline in interest rates is expected to continue, with average rates for new and used cars potentially falling to 7% and 10%, respectively, by late 2025.
Getting back to 5% home loan rates will take time, experts say. "I agree with the most recent MBA forecast, expecting rates to reach 5% in the second half of 2025," says David Druey, Florida regional president of Centennial Bank. However, this is mere speculation — and several factors could change this timeline.
Locking in early can help you get what you were budgeting for from the start. As long as you close before your rate lock expires, any increase in rates won't affect you. The ideal time to lock your mortgage rate is when interest rates are at their lowest, but this is hard to predict — even for the experts.
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.
After 14 months of stagnancy, the Federal Open Market Committee (FOMC) lowered the federal funds rate three times in 2024, ending the year with a target range of 4.25% to 4.50%, the lowest since February 2023.
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.
He expects mortgage rates to end 2025 around 6.5 percent. The housing market has been stuck for years, with mortgage rates rising rapidly in 2022 and 2023, peaking close to 8 percent.
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.
The lowest average mortgage rates on record came about when the Federal Reserve lowered the federal funds rate in 2020 and 2021 in response to the pandemic. As a result, the weekly average 30-year, fixed-rate mortgage fell to 2.65%, while the average 15-year, fixed-rate mortgage sunk to 2.10%.
The average rate on a 5 year fix in January 2025 is 4.80% which is much higher than the average rate on a 5 year fix in January 2020, which was 2.74%.
Falling interest rates expected to drive recovery in the second half of 2025, says CIBC's chief economist.
You can earn hundreds of dollars or more
If you open a 2-year CD with a rate of 4.20%, for example, you'll earn approximately $483 on your $5,000 deposit. If you keep the money in longer, you'll make even more. A $5,000 5-year CD at 4.35% will leave you with a profit of around $1,187.
CD account interest rates will drop
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.
If you put $500 in a CD for five years, how much would you make? This depends on the CD rate. A five-year CD at a competitive online bank could have a rate of 4.00% APY, which would earn around $108 in interest in five years. A five-year CD with a 1% rate would earn about $26.