Changes to Interest Rate Projections
In CBO's last full set of economic projections, which were released in June, the organization estimated that the federal funds rate would rise to a fourth-quarter average of 5.3 percent in 2024 before falling to 3.3 percent by the fourth quarter of 2027.
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%.
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%.
Interest rate predictions for the next five years depend on factors like inflation, economic growth, and central bank policies. For the next five years, including 2025, analysts forecast interest rates to further adjust, suggesting a stabilisation of around 3.25-4.25% by the end of 2025.
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.
and then projects that mortgage interest rates – in particular the 30-year fixed rate, which is closely tied to the federal funds rate and the 10-year Treasury note yield – will remain elevated, and only decline 0.2 percent from 6.5 percent in 2025 to 5.9 percent in 2027.
As a result, we expect the Bank to cut interest rates from 4.75% now to 3.50% in early 2026, further than the low of 4.00% that investors currently expect.
“Our view is that [the Fed] probably do have one more [cut], but pauses at or above 4%” in 2025. Against this backdrop, another scenario becomes possible, if unlikely: A strong economy and renewed rise in inflation could prompt the Fed to raise rates again in 2025.
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.
NAHB: Rates Will Average 6.36% in 2025 and 5.93% in 2026. The National Association of Home Builders expects the 30-year mortgage rate to decrease to around 6.5% by the end of 2024 and fall below 6% by the end of 2025, according to the group's latest outlook.
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.
Interest Rate in the United States is expected to be 4.50 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. In the long-term, the United States Fed Funds Interest Rate is projected to trend around 3.50 percent in 2026, according to our econometric models.
"As of January 2025, certificate of deposit (CD) rates have been experiencing a downward trend, influenced by recent Federal Reserve policy decisions. Various projections seem to suggest that rates may go as low as 2.5% by 2026.
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.
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.
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.
UK interest rates will fall “four times” or more in 2025 -- to at least 3.75% by the end of the year. A majority of economists made this two-fold forecast before UK long-term borrowing yesterday crept up to its highest level since 1998.
Base rate predictions and what they mean for mortgages
However, the OBR is less optimistic, predicting a 4.5% base rate by 2027. If the base rate does fall to or below 3.5%, borrowers should be able to borrow more which would make more mortgages available to buyers. Affordability testing may also be relaxed.
Housing Market Predictions for 2027
Goldman Sachs leans towards optimism, anticipating a steady ascent in national home prices over the next four years. Their forecast predicts growth of 3.8% in 2024, rising steadily to 4.9% by 2027.
Housing Market Forecast 2026: Will Prices Rise or Fall
In 2026, the housing market is expected to continue its upward trend, with home prices rising at a moderate pace. The pent-up demand for housing is expected to be supplied between 2025 and 2030, according to the National Association of Home Builders.
Likewise, we expect the 10-year Treasury yield to move down to an average of 3.0% in 2027 from its current yield of 3.7%. We expect the 30-year mortgage rate to fall to 4.75% in 2027 from an average of 6.75% in 2024. Inflation forecast.
Key takeaways. The Federal Reserve is projected to cut interest rates three more times in 2025, bringing the key borrowing benchmark to 3.5-3.75 percent, according to Bankrate's 2025 Interest Rate Forecast from Chief Financial Analyst Greg McBride, CFA.