What will interest rates be in 2024 2025?
Mortgage rates are expected to decline later this year as the U.S. economy weakens, inflation slows and the Federal Reserve cuts interest rates. The 30-year fixed mortgage rate is expected to fall to the mid- to low-6% range through the end of 2024, potentially dipping into high-5% territory by early 2025.
The upper boundary of the Federal Reserve's target range for its benchmark interest rate, currently 5.5%, will fall only to 4% by the end of 2025, according to the latest Bloomberg monthly survey. That's a half percentage point higher than respondents expected just a month ago.
Projected Interest Rates in the Next Five Years
ING's interest rate predictions indicate 2024 rates starting at 4%, with subsequent cuts to 3.75% in the second quarter. Then, 3.5% in the third, and 3.25% in the final quarter of 2024. In 2025, ING predicts a further decline to 3%.
Mortgage rates are likely to trend down in 2024. Depending on which forecast you look at for housing market predictions in 2024, 30-year mortgage rates could end up somewhere between 6.1% and 6.4% by the end of the year.
Driving the news: The median Fed official now expects interest rates to be somewhat higher in 2025 and 2026 than they did in December — anticipating fewer rate cuts will be justified in the coming two years. The median projection for the longer-run rate also ticked up, to 2.6% from 2.5%.
The average 30-year fixed mortgage rate as of Thursday was 6.99%. By the final quarter of 2025, Fannie Mae expects that to slide to 6.0%.
1) Interest-rate forecast.
Likewise, we expect the 10-year Treasury yield to go down to 2.75% in 2026 from its current yield of 4.20%. We expect the 30-year mortgage rate to fall to 5.0% in 2025 from an average of 6.8% in 2023.
Here's where three experts predict mortgage rates are heading: Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."
Now, Fannie Mae expects rates to be a half-percent higher (6.4%) by the end of this year, and remain above 6% for another two years, gradually declining to a flat 6% by fourth-quarter 2025. Freddie Mac's latest data shows the average rate for a 30-year fixed mortgage is currently around 6.74%.
The bottom line
Sure, mortgage rates could fall to 3% at some point, but chances are that's not going to happen anytime soon. Moreover, waiting for rates to drop before you buy your home could backfire. Instead, consider buying your house now and refinancing your mortgage when rates improve.
Will rates go back down in 2024?
The Fed's latest projections materials show that three rate cuts are still expected in 2024, bringing the rate down by three-quarters of a percentage point by the end of the year. However, the Fed's economic policy isn't set in stone.
That means the mortgage rates will likely be in the 6% to 7% range for most of the year.” Mortgage Bankers Association (MBA). MBA's baseline forecast is for the 30-year fixed-rate mortgage to end 2024 at 6.1% and reach 5.5% at the end of 2025 as Treasury rates decline and the spread narrows.
Interest rates have held steady since July 2023.
The Fed raised the rate 11 times between March 2022 and July 2023 to combat ongoing inflation. After its December 2023 meeting, the Federal Open Market Committee (FOMC) predicted making three quarter-point cuts by the end of 2024 to lower the federal funds rate to 4.6%.
While it's not possible to make accurate UK mortgage rate predictions for the next 5 years, the Office for Budget Responsibility has forecast that mortgage rates on average are expected to rise from a low of 2% in 2021 to a peak of 5% in 2027 across all properties.
The 10-year treasury constant maturity rate in the U.S. is forecast to decline by 0.8 percent by 2026, while the 30-year fixed mortgage rate is expected to fall by 1.6 percent. From seven percent in the third quarter of 2023, the average 30-year mortgage rate is projected to reach 5.4 percent in 2026.
Savings account rates will likely go down in 2024 when the Federal Reserve cuts its rate. A high-yield savings account is still a good place for savings you may need to access occasionally, like an emergency fund.
The average 30-year fixed mortgage rate as of Friday is 6.91%. By the final quarter of 2025, Fannie Mae expects that to slide to 6.0%. While Wells Faro's model expects 5.8%, and the Mortgage Bankers Association estimates 5.5%.
For people looking to buy a home, a recession can bring some advantages. When the economy is not doing well, home prices often drop, which can be good news for those who want to find a good deal; plus, during recessions, mortgage rates usually stay low, meaning buyers can get a home with lower monthly payments.
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.
On March 20, 2024, the US Federal Reserve released the updated Fed dot plot, which showed a projected 2.25-point interest rate cut by yearend 2026. This would reduce the fed funds target rate range from 5.25%-5.50% today to 3.00%-3.25%.
Will mortgage rates ever drop below 5 again?
The good news is that inflation is cooling, and many experts expect interest rates to move in a downward direction in 2024. Then again, a two-point drop would be significant, and even if rates fall, they're not likely to get down to 5% within the next year.
| Product | Interest Rate | APR |
|---|---|---|
| 30-year fixed-rate | 7.224% | 7.305% |
| 20-year fixed-rate | 7.091% | 7.198% |
| 15-year fixed-rate | 6.367% | 6.502% |
| 10-year fixed-rate | 6.053% | 6.247% |
While officials affirmed their view for three rate cuts this year even as they upgraded the economic outlook, they trimmed the number of cuts expected next year from four to three for a slightly shallower pace of easing - a stance one analyst characterized as "bullish-dovish."
| Date | Value |
|---|---|
| December 31, 2024 | 3.50% |
| September 30, 2024 | 5.75% |
| June 30, 2024 | 5.75% |
| March 31, 2024 | 5.75% |
You can refinance as often as you like, as long as it makes financial sense (and you meet the lender's seasoning requirement). If your goal of refinancing is to save money, you'll want to consider the closing costs in comparison to your potential savings.
