interest rate By the end of 2024, with Fed Three interest rate cuts, cuts full percentage point The federal funds rate has been lowered since September. This trend is likely to continue through 2025.
But with inflation Still higher than the Fed 2% targetpowerful laboratory market and a new governmentThe central bank has said it will cut interest rates more slowly over the next year.
Fed officials reduce their prospects According to their meeting minutes, assuming an increase of a quarter percentage point, it is expected to decrease from four to two by 2025 December meeting.
“Strong U.S. economic data has heightened concerns that the Fed will have little room to cut interest rates in 2025,” Solita Marcelli, chief investment officer of the Americas at UBS Global Wealth Management, wrote in a research note. Worry.
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Experts expect the Fed to keep interest rates unchanged at its January 28-29 meeting, followed by only a handful of rate cuts throughout the year. Given this, most Americans expect their financing spending to decrease, but not by much, said Greg McBride, chief financial analyst at Bankrate.
“Interest rates have been unusually low for the better part of 15 years and unusually high for the past two years,” he said. “They are falling but will eventually stabilize at levels higher than we will see before 2022.”
While Fed officials have signaled two rate cuts, McBride expects as many as three cuts this year, taking the key benchmark rate to 3.5%-3.75%. While that’s not the rate consumers will pay, the Fed’s move still Affects lending and savings rates Consumers see it every day.
From mortgage rates and credit cards to car loans and savings accounts, This is his prediction The direction of interest rates in the next year:
Forecast: Credit card interest rates drop to 19.8%
Average credit card interest rates since the central bank cut interest rates only Reached an extremely high level.
Going forward, annual percentage rates are unlikely to improve much. McBride predicts that by the end of 2025, the average annual interest rate on credit cards will drop to 19.8%, down about half a percentage point from today.
Cardholders typically see the impact within one or two billing cycles. But for people who carry balances every month, “borrowers need to continue working to pay off their debt,” McBride said. Interest rates “will not fall fast enough to provide meaningful relief.”
Forecast: Mortgage rates will hit 6.5%
Re/Max Advance Realty real estate sales associate Ryan Ratliff (center) shows Ryan Paredes (left) and Ariadna Paredes a home for sale in Cutler Bay, Florida on April 20, 2023.
Joe Reddell | Getty Images
“Mortgage rates have been rising, not falling, since the Fed began cutting rates in September,” McBride said.
McBride now expects mortgage rates to “stay in the 6% range for much of the year,” he said, “with a short-term spike above 7%.”
He predicts that 30-year fixed mortgage rates may reach 6.5% by the end of the year. But since most people have fixed-rate mortgages, the interest rate won’t change unless they refinance or sell their current home and buy another property.
Forecast: Car loan rates drop slightly to 7%
When it comes to their cars, consumers are paying more each month due to higher prices. vehicle price Interest rates on new loans increase.
Although someone plans Financing a new car May benefit from lower interest rates in the future, but affordability concerns won’t change significantly.
McBride said five-year new car loan rates are expected to fall to 7% from 7.53%, while four-year used car financing costs may fall from 8.21% to 7.75%.
Forecast: High-yield savings rate falls below 4%
In recent years, online revenue has been the highest savings McBride said the account delivered its best returns in more than a decade and still pays nearly 5%.
While those rates are falling, “they are falling slowly and are still well above the rate of inflation,” McBride said.
McBride predicts that interest rates on the highest-yielding savings and money market accounts could hit 3.8% by the end of 2025, while the highest-yielding one-year and five-year CDs will drop to 3.7% and 3.95%, respectively.
“It’s a pretty attractive environment for savers,” McBride said.
