Will interest rates go down? Expert predictions for 2024

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Over the past two years, interest rates have risen as the Federal Reserve has tried to get a handle on inflation.

This has been great news for savers, as rates for savings accounts and certificates of deposit (CDs) are at record highs. But it’s also made borrowing much more expensive.

While the era of rate hikes may be over, many are wondering when rates will start coming back down. While the Fed has hinted at rate cuts in the future, it’s unclear when they’ll happen (or even if they’ll happen).

When can we expect interest rates to start falling? Here’s what the experts predict will happen with interest rates in 2024 — and how that will affect mortgages, savings accounts, credit cards, and more.

The current interest rate landscape

The Fed has the power to adjust the federal funds rate, which determines the cost banks can borrow or lend to each other. But by raising this rate, the Fed can reduce the money supply and make borrowing more expensive. This may lower inflation.

The Fed raised interest rates 11 times between 2022 and 2023 to combat high inflation. Inflation peaked around June 2022 at 9.1% and has since fallen to 3.1% as of November 2023. This is closer to the Fed’s target rate of 2%.

Rate hikes can significantly impact consumers. When rates increase, consumers can earn higher returns on their savings. Higher interest rates also make it more expensive to borrow money. This can impact various types of loans, such as mortgages, car loans, or personal loans.

The Fed is predicted to cut rates only twice this year. While these cuts may make borrowing cheaper, they likely won’t provide much relief, Red Ventures experts say. Here are some key predictions.

How high will savings rates go in 2024?

Higher interest rates often translate to higher returns on savings accounts. For example, the average savings account rate in Jan 2022 was 0.06%. Today, it’s 0.46%.

While that may not sound like much, many of today’s high-yield savings accounts and CDs offer rates much higher — often seven times the average.

Most experts predict savings account yields have already peaked but may stay elevated for the next few years.

Greg McBride, CFA, Red Ventures chief financial analyst, predicts yields on CDs, money market accounts, and high-yield savings accounts will drop slightly. Overall, they'll remain at their highest level in decades.

Even if rates do drop, they likely won’t drop very quickly. Here are some of McBride’s predictions for where saving rates will be in 2024:

• Money market accounts: 0.35% (down from 0.47%)
• 1-year CDs (national average): 1.15% (down from 1.77%)
• 5-year CDs (national average): 1% (down from 1.43%)
• Saving accounts (national average): 0.3% (down from 0.62%)

Falling rates doesn’t mean you should pull all your money out of a savings account. Rates will likely remain high for some time, which makes a high-yield savings account a great place to grow your money and keep it accessible.

With potential rate cuts on the horizon, long-term CDs may be worth considering, especially for funds you don’t need immediately. These accounts let you lock in higher yields for longer while still being a safe place to keep your money. Since CD rates may level off in 2024, now’s the time to consider opening one.

Mortgage rates may drop this year

Mortgage rates are much higher than they were a few years ago. At the beginning of 2022, the average 30-year fixed mortgage rate was around 3%. Now, it’s close to 7%.

If interest rates decline this year, mortgage rates may also fall slightly. McBride predicts mortgage rates will fall to around 5.75% in 2024 — making home loans slightly more affordable for would-be buyers.

But don’t expect rates to drop suddenly. Most experts predict a slower decline throughout the year — plus, rates will remain at some of the highest levels in decades.

Depending on your current rate and what happens with mortgage rates, 2024 may be an excellent time to consider refinancing. If you financed your home when rates were at their peak, refinancing could help you secure a lower monthly payment and save you money on interest. 

Credit card interest rates may not decline much

Carrying a balance on a credit card got very, very expensive in 2023.

The average credit card interest rate climbed to nearly 21% last year. This contributed to Americans’ ballooning credit card debt, which reached $1 trillion in 2023.

Unfortunately, don’t expect much relief in 2024. McBride predicts rates will hover around 20% for most of the year and fall to 19.9% by the end of 2024.

The best strategy to stay out of debt is to pay your credit card balance in full every month. This way, you can avoid credit card interest and won’t be affected by interest rate fluctuations.

If you have credit card debt, it’s essential to make a plan to pay it off. You may want to consider a balance transfer credit card, which moves high-interest debt to a credit card with low (or no) interest for a period of time. Here are some of the best balance transfer cards to consider.

The bottom line

The future is never certain, and interest rates are no exception. Most experts agree that 2024 will see modest rate cuts beginning around the middle of the year. This will translate to lower savings rates but also lower rates on products like mortgages, credit cards, and personal loans.

You don’t need to wait for the Fed to take action with your money now. Consider opening a CD or high-yield savings account to take advantage of high rates. If you can get a lower rate on your mortgage, consider refinancing. Focus on paying off any high-interest debt holding you back. These actions can help set you up for a successful 2024, no matter what happens with interest rates.

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