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.
Current Forecasts and Expert Opinions
The short answer is: It's highly unlikely we'll see mortgage rates drop back to 3% anytime soon. However, recent inflation numbers point to cooling of the pace of inflation.
Depending on what happens with the economy, savings rates could continue to gradually decline in 2025 as the Federal Reserve continues cutting interest rates. That's why now may be a good time to lock in a higher CD rate while they are still readily available.
CD rate forecast: 2024-2025
The Fed lowered its rate by one-quarter percentage point to a rate range of 4.25% to 4.50% after its eighth meeting of 2024 on Dec. 17-18.
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.
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.
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%.
However, interest rates predictions are difficult as any further cuts depend on factors such as what happens with inflation. So predictions will have to be revised. For example, in January 2024, Capital Economics forecast that interest rates would be reduced to 4.00% by the end of 2024.
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.
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.
At its February 2024 meeting, the Reserve Bank Board decided to leave the cash rate target unchanged at 4.35 per cent. This decision supports progress of inflation to the midpoint of the 2–3 per cent target range within a reasonable timeframe and continued moderate growth in employment.
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%.
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.
On Dec. 18, the Federal Reserve made its third consecutive cut of 2024, reducing the federal funds rate by 0.25 percentage points.
Which bank gives the highest interest rate on FD? As of 2024, Canara Bank offers the highest interest rate of 7.25% for 444 days.
Therefore, prospective borrowers should anticipate mortgage rates in the low to mid-6% range through the end of 2024." Still, even a small rate reduction can make a big impact due to the large size of most mortgages and the long repayment timeline.
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.
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.
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.
In 2024, many banks and credit unions offered CDs with rates over 5.00%. Although rates are expected to decline, CDs may still be valuable for many consumers.