Fannie Mae: Rates Will Average 6.4% in 2025 and 6.1% in 2026. The December Housing Forecast from Fannie Mae puts the average 30-year fixed rate at 6.6% in the beginning of 2025, declining to 6.1% in the first quarter of 2026.
It's possible that rates will one day go back down to 3%, though if current trends hold that's not likely to happen anytime soon.
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.
Will interest rates rise again in 2025? At this stage, it appears unlikely that rates will rise again in 2025, but this does not mean that cuts are imminent either, and the RBA may continue to hold for the next several months.
For only the third time in 2024, the Federal Reserve has lowered the federal funds rate. On Dec. 18, the Fed cut the rate, which influences interest on everything from car loans to credit cards, by 25 basis points. That takes it from 4.50% to 4.75% to 4.25% to 4.50%, the lowest it's been since February 2023.
The bottom line. Predicting exactly when mortgage rates will hit 5% is difficult. It could happen by late 2025, but market conditions could speed up or delay this timeline. "Some consumers feel rates will drop in the next two to four months [but] that may never happen," says Rathbun.
As Beene notes, "The recent rate cuts by the Fed have already produced small drops in the rates of CD and savings accounts at many major banks, and we're going to see that continue if interest rates drop. If you want to lock in a certain rate a CD currently provides, it would be a good idea not to wait."
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.
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.
After hitting record-low territory in 2020 and 2021, mortgage rates climbed to a 23-year high in 2023 before descending somewhat in 2024. Many experts and industry authorities believe they will follow a downward trajectory into 2025. Whatever happens, interest rates are still below historical averages.
There's Still a Way to Snag a 3% Mortgage Rate. Assumable mortgages are rare but allow buyers to take over a seller's existing debt, offering an avenue to secure lower borrowing costs.
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.
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.
For example, a $10,000 deposit in a five-year CD with 3.50% APY would earn around $1,877 in interest. The same CD with a 1.50% APY would earn around $773 in interest, and the same CD with a 0.01% APY would earn only $5 in interest.
Certificates of Deposit (CDs)
In return, you'll get more interest than with a savings or other account you can access any time. One-year CDs are currently paying rates of 3.50 – 4.50%, which comes out to $2,000 in interest on a $50,000 CD.
While longer-term CDs may tie up your funds for years, a 6-month CD allows you to access your money relatively quickly. If you suddenly need your $5,000 for an emergency or a more lucrative investment opportunity arises, you won't have to wait years to access your funds without incurring hefty penalties.
One major drawback of a CD is that account holders can't easily access their money if an unanticipated need arises. They typically have to pay a penalty for early withdrawals, which can eat up interest and can even result in the loss of principal.
Key Takeaways. Cashing out a CD early will usually trigger some sort of penalty. CD early withdrawal penalties are worth incurring when you need the money for an emergency or down payment, or when rates have risen so much that you'd be better off reinvesting the funds into a more lucrative option.
The national average 1-year CD APY started 2024 at 1.96% and ended the year at the same level. Similarly, the average APY for 5-year CDs started at 1.41% and ended at 1.42%. 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.
For instance, he predicted the national average for savings accounts will be 0.35% at the end of 2025, but top-yielding offers could stand at 3.8% by year-end. Top-yielding 1-year CDs could pay about 3.7%, while five-year CDs may pay 3.95% by the end of 2025, McBride forecast.
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.
There is technically no limit to how many times you can refinance your home. If you meet the lender's qualifications and it makes financial sense for your situation, you can refinance as often as you wish. However, just because you have the option to refinance multiple times doesn't mean it's always a wise choice.