Interest rates are expected to gradually go down starting in 2025, but the timing and extent of the reductions vary among experts and depend heavily on economic conditions such as inflation, employment, and global developments.
- The Federal Reserve and experts project that interest rates will roughly fall from around 4.25%-4.5% (in late 2024) to about 3.2%-3.8% in 2025, then to 2.5%-2.9% in 2026, and stabilize around 2.2%-3.0% in subsequent years. However, the exact pace and amount of cuts are uncertain and data-dependent.
- Some experts and market expectations anticipate possible 25-basis-point rate cuts in September 2025 and potentially October 2025, but some institutions like Morgan Stanley predict rates might remain stable until 2026.
- In the UK, the Bank of England has recently cut rates, and further cuts may happen, but there is increased uncertainty and potentially fewer cuts in 2025 than previously expected.
- Mortgage rates specifically are forecasted to remain elevated through much of 2025, with gradual downward trends expected by the end of the year. They might fall into the mid-6% range or slightly below towards the end of 2025 or into 2026, depending on inflation and economic factors.
In summary, interest rates are likely to go down gradually starting in late 2025, with some cuts possibly occurring as soon as September 2025, but significant drops may take longer and depend on continuing improvements in inflation and economic stability.
