Pleas for lower mortgage rates could be the battle cry of the decade among aspiring homeowners and those looking to refinance, and for good reason. According to Freddie Mac, mortgage interest rates are down for the second week in a row — but just barely.

Current interest rates for a 30-year fixed-rate mortgage are 6.84%, a decrease of only one basis point since last week. The average rate for a 15-year fixed-rate mortgage is down two basis points to 5.97%. The declines are small, but two weeks of drops could leave potential home buyers wondering, “Is this a good time to buy a house?”

If you’re waiting for rates to drop significantly before buying a home, don’t hold your breath. Current financial and housing market data indicate little interest rate relief in the coming months. Plus, there are financial wildcards in the mix, including lingering inflation and on-and-off tariffs. If you want to buy, you need a strong financial footing, a decent-sized downpayment, and a focus on lower fees to partly compensate for the higher initial mortgage rate. And remember, you can always refinance your mortgage later.

Learn more: How to buy a house in 13 steps

In this article:

Are mortgage rates dropping?

As of June 12 this year, Freddie Mac reported that rates for 30-year fixed-rate mortgages had stayed below 7% for 21 consecutive weeks. This time last year, mortgage rates were averaging 6.95%. But considering rates are still not far below 7%, we get it if you feel like you can’t catch a break in the current economy.

In situations like these, it pays to look at the numbers. Here’s the Freddie Mac data on mortgage rates for the past 52 weeks as of June 12, 2025:

30-year fixed-rate mortgage: 6.08% to 7.04%

15-year fixed-rate mortgage: 5.15% to 6.27%

If you just go by the numbers, rates on both 30-year and 15-year fixed-rate mortgages remain mostly below the highs noted above. So, yes, mortgage rates have decreased incrementally over the past year. Will they keep dipping? That remains to be seen.

So, will mortgage rates go down at all this year?

If you’re looking for a substantial interest rate drop in 2025, you’ll likely be left waiting. The latest news from the Federal Reserve and other key economic data point toward steady mortgage rates on par with what we see today.

The latest from the Federal Reserve

When the Fed — the common nickname for the Federal Open Market Committee (FOMC) — held its May 2025 meeting, it voted to keep the federal funds rate the same for the time being. Recently-released minutes to the meeting indicate the FOMC is willing to wait for further signs on the economy, even though there are increasing risks for higher inflation and elevated unemployment.

That federal funds rate tends to directly influence rates on shorter-term lending. While mortgage rates aren’t directly based on the fed funds rate, they typically mirror fed fund rate trends. So, if the fed funds rate goes up, mortgage rates will likely follow. The inverse is also true.

The next Fed meeting is set for next week, June 17 and 18. According to the CME FedWatch tool, there’s roughly a 972% chance that the Fed will not cut its rate at this meeting.

Learn more: How the Fed rate decision impacts mortgage rates

The latest on 10-year Treasury yields

While short-term lending rates closely follow the fed funds rate, mortgage rates more closely follow the 10-year Treasury yield. As of June 10, the 10-year Treasury yield sat at 4.47% — exactly where it was a year prior.

You’re probably wondering why today’s mortgage rates aren’t in the 4% range, right?

To determine current mortgage rates, lenders add a “spread” to the 10-year Treasury yield. The spread is simply the difference between the rates consumers pay and the rate on the 10-year Treasury. Without getting too much into the weeds, charging a spread helps mortgage lenders cover costs associated with making loans to the public and the risk of providing such loans.

Now, let’s go back to mortgage rates. This week last year, the average 30-year fixed mortgage rate was 6.95%, and the 10-year Treasury yield was 4.47% — a spread of 2.48%. Today, the average 30-year fixed mortgage rate is 6.84%, and the 10-year Treasury yield is 4.47% — a spread of 2.37%. The spread was a smidgen wider in June 2024 than now, and mortgage rates were a bit higher then.

Read more: When will mortgage rates finally go back down to 5%?

Should you wait to buy until mortgage rates go down?

In short, no. You probably shouldn’t wait to buy a home until mortgage rates drop. Mortgage rates are just one part of the affordability equation. You also have to consider home prices, a factor of housing supply and demand.

The current housing market is in a crunch. To put it simply, buyers outnumber homes for sale, especially homes in price ranges accessible to the first-time home buyer. When supply and demand are out of balance like this, home prices tend to remain high since sellers know they’ll have multiple buyers interested.

According to data from the Federal Reserve Bank of St. Louis, the median sale price of single-family homes has generally trended upward since Q1 of 2009. At that time, the median sale price was $208,400. The median price had risen to $416,900 by Q1 2025.

While recession chatter has recently increased — especially after the first negative gross domestic product (GDP) in three years — prospective buyers likely won’t see much relief in a true recession. If interest rates drop like they tend to do in recessions, that will increase the number of people looking to buy and lock in a lower interest rate. That drives up demand for the already limited supply of homes.

To truly save, buyers need both interest rates and home prices to drop, which is unlikely.

Keep reading: Do mortgage rates go down in a recession?

Strategies for buyers in today’s mortgage market

If you crave the comforts of homeownership, the best strategy in today’s market may be to buy what you can afford. Whether that means a smaller house or a condo instead of a single-family home, owning something puts you in a position to start building equity.

Yes, shopping for the best mortgage lenders with low rates and fees is crucial when getting a mortgage. But to help you find your ideal home that balances affordability and desirability, it pays to adopt a curious mindset and consider lesser-discussed financial tools.

Get curious

There’s no better time to learn more about your local real estate market than today. By adopting a sense of curiosity, you could discover that your city has more to offer housing-wise than you previously thought.

You may want to take weekend excursions to lesser-known neighborhoods and suburban developments beyond the city limits. You never know what you’ll find that could expand your idea of what “home” looks like — including new developments, school districts, and types of homes.

Consider a fixer-upper

If you’re looking to spend less on a home in today’s mortgage market, a house needing a bit of TLC could help you do just that. Loans like the FHA 203(k) mortgage can roll your purchase and renovation costs into one convenient loan. When you qualify and have an accepted offer, your lender immediately funds the home’s purchase price and puts the cost of renovations into an escrow account. As you make repairs, funds get dispersed.

Rethink your commute

How would it feel to have a longer commute yet come home to a house you love? Master-planned communities tend to crop up outside major cities, offering amenities like parks, shopping, and top-notch schools — all in exchange for a longer commute. These areas could look a lot more palatable if they offer commuting options like park-and-ride or commuter rail. Dare to consider parking the car and taking public transit if it could get you into the home of your dreams.

Go condo

While shared walls, floors, and ceilings might not immediately scream “dream home,” they could help you find an affordable home in a terrific area. Condominiums come in various shapes and sizes, from apartment-style flats to townhomes. Depending on the area, you might even score a small backyard. However, be sure to consider HOA fees when calculating your monthly payment.

Consider a 15-year mortgage

While the monthly payment on a 15-year mortgage will be higher than the typical 30-year, these loans have plenty of upsides. Not only will you pay off your home on a speedier timeline, but you’ll also likely score a lower interest rate and save a ton on interest over the life of your loan.

Explore rate buydowns

To make today’s mortgage rates more palatable, look into rate buydown options. An interest rate buydown lets you pay cash up front in exchange for a reduced interest rate on your mortgage. Buydowns can be permanent or temporary (for your loan’s first one to three years, for example). Even a few years of lower rate relief can make today’s home prices more affordable.

When will mortgage rates go down? FAQs

Are mortgage rates expected to drop?

Economists expect mortgage rates to hold steady for the remainder of this year. According to Freddie Mac data, the interest rate on a 30-year fixed-rate mortgage has ranged from 6.08% to 7.04% so far in 2025.

Is 7% a high mortgage rate?

Compared to historical mortgage rates, 7% isn’t considered a high rate. While it might be high compared to pandemic-era rates that were sub-3%, it’s on par with mortgage rates in the 1990s, and considerably lower than the double-digit rates seen in the late 1970s and early 1980s.

Is it impossible to get a 3% interest rate on a mortgage?

It’s not impossible to get a 3% interest rate, but doing so requires the perfect set of circumstances. You’d need to find a homeowner with an assumable mortgage — one that can be passed to a new owner at the same interest rate as the original loan. Assumable mortgages are generally government-backed loans from agencies like the VA, FHA, or USDA.

Laura Grace Tarpley edited this article.

Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors’ opinions or evaluations.

After reaching a peak of 7.04% in January 2025, mortgage rates retreated to the mid-6% range in March but have since been on the rise, closing in on 7% again.

The average 30-year fixed mortgage rate increased 13 basis points in May, landing at 6.89% to finish out the month, according to Freddie Mac data. One basis point is one one-hundredth of a percentage point.

Meanwhile, the Trump administration’s tariff policies may continue to indirectly fuel mortgage rate volatility, thanks to the rising costs they threaten to add to the economy. Consequently, most housing market experts expect mortgage rates to remain stubbornly high, only gradually easing as we move through 2025.

Fed Votes To Hold Rates Steady Again Amid Economic Uncertainty, Tariffs

In a widely anticipated move, the Federal Open Market Committee (FOMC)—the Federal Reserve panel charged with setting interest rates—voted unanimously to keep the federal funds rate unchanged at its May meeting. The federal funds rate is the overnight borrowing rate for commercial banks and credit unions and indirectly influences mortgage rates.

After holding rates between 5.25% and 5.5% between July 2023 and August 2024, the Fed implemented three rate cuts between September and December 2024, totaling one percentage point.

The May pause keeps the target benchmark range at 4.25% to 4.5% and marks the third consecutive meeting in 2025 where policymakers voted to keep the current rate.

The most recent Fed economic projections maintain the two rate cuts in 2025 that policymakers projected in the December forecast, making the expected range for the borrowing rate between 3.75% and 4% by the end of the year.

The Fed Is in ‘Wait-and-See’ Mode

“Patience” was Fed Chair Jerome Powell’s mantra at a post-meeting press conference, stating that the substantial trade, immigration, regulation and fiscal policy changes that the new administration has begun to implement were still evolving,“and their effects on the economy remain highly uncertain.”

Despite acknowledging larger-than-anticipated looming tariffs amid higher inflation and unemployment risks, Powell noted repeatedly the economy was “in a good position to wait and see,” allowing the data-dependent Fed to await further clarity before making any adjustments to its policy stance.

In the meantime, Powell admitted, “We’re really not at all clear what it is we should do.”

What This Means for Mortgage Rates and Home Affordability

As the Fed began raising rates in March 2022 to wrestle runaway inflation down to its 2% target, the housing market felt the squeeze. Mortgage rates surged to decades-high levels as home prices hit historic peaks amid fierce demand and scant inventory, shutting the door on many would-be buyers.

Though multiple factors impact mortgage rate movements, industry experts say affordability will likely remain a challenge for many this year, with the Trump administration’s trade policies adding to the burden.

Namely, tariffs threaten to impact new home construction by pushing up costs on imported building material costs. National Association of Home Builders data indicates that new home prices are set to increase an estimated $9,200 on average, fueled by tariffs.

However, some experts suggest it’s still possible to see some improvement in home affordability this year.

“If economic conditions stabilize and inflation continues to show signs of being under control, that may initiate a lower interest rate environment which could bring more housing inventory on the market,” Rob Cook, vice president at Discover Home Loans, tells Forbes Advisor.

Will Mortgage Rates Drop in 2025?

So, given this swirl of economic uncertainty, where can we expect mortgage rates to go?

“[M]any economists expect mortgage rates will stay near their current levels for some time, possibly for most of 2025,” Cook says. “Future rates will continue to be impacted by Federal Reserve decisions, inflation and employment data, and dynamics including home price trends.”

Other housing industry experts agree that we are unlikely to see much of a drop in mortgage rates this year.

“There are many unknowns on the horizon that outweigh what we know from current data and likely even the Fed’s perspective on what we know,” said Danielle Hale, chief economist, at Realtor.com, in an emailed statement. “As a result, mortgage rates are likely to remain in the high-6% range they’ve held for the last 6-plus months.”

Should Buyers Wait for Rates To Fall?

Some experts caution that waiting for mortgage rates to drop further can be a risky strategy.

“For aspiring home buyers, the right time to buy really depends on your individual goals and financial situation,” says Fred Bolstad, head of retail home lending at U.S. Bank. “If you are in the financial position to afford the payments on a home you find and love, there is no need to wait.”

What’s Next?

The next two-day FOMC meeting is set for June 17-18. How likely are policymakers to cut rates?

“The Fed’s statements after their meeting…highlighted uncertainty around inflation and economic growth,” says Cook. “Given that, it appears likely the Fed will maintain their current wait-and-see approach by holding interest rates steady in June.”

Other experts align with this view. Following the May meeting, odds for another pause at the June meeting were roughly 3-1, while Fed watcher forecasts for a first rate cut in July were approaching the same 3-1 margin.

Pro Tip The rate you’re offered on a mortgage will also depend on the lender you work with, its business costs and your financial profile. Ultimately, if you’re looking for a home loan, compare your options with multiple mortgage lenders to find a good deal.

Mortgage Rate Predictions for 2025

Here’s how some experts predict market conditions will affect the average 30-year fixed-rate mortgage in the third quarter of 2025 and beyond.

National Association of Home Builders (NAHB): 30-year fixed rate will average in the mid-6% range by the end of 2025

In his report highlighting key data from the April Macro Economic Outlook, Eric Lynch, economist at NAHB, offered this updated prediction: “As of April 10, the current Freddie Mac 30-year fixed-rate mortgage sits at 6.62%. While it will not be smooth, NAHB anticipates the 30-year mortgage rate to average around this rate by the end of 2025, and just above 6% by the end of 2026.”

NAR: Mortgage rates will average 6.4% in 2025 and 6.1% in 2026

“So mortgage rates can go down with a Fed rate cut if inflation is under control,” said Lawrence Yun, chief economist at NAR. “But it’s not going to go down to 4% mortgage rate conditions because we have a huge national debt… It cannot go to 4%, and it cannot go to 5%, but it can go to 6% with the Federal Reserve rate cuts and calmer inflation.”

Zillow Home Loans: Mortgage rates are on a bumpy path

“The future path of mortgage rates is uncertain, dependent on both economic data and headlines from the new administration’s policies,” writes Kara Ng, senior economist at Zillow, in the April Forecast. “While Zillow expects mortgage rates to end the year near mid-6%, barring any unforeseen shocks, that path might be bumpy.”

Fannie Mae: Revises mortgage rate forecast downward

Per Fannie Mae’s May Economic and Housing Outlook: “We forecast mortgage rates to end 2025 and 2026 at 6.1% and 5.8%, respectively, down from 6.2% and 6% in our prior forecast.”

Freddie Mac: Expect rates to remain high in 2025

According to its January Economic, Housing and Mortgage Market Outlook, Freddie Mac expects mortgage rates to stay “higher for longer” this year, with the slightly lower rates (compared to 2024) leading to a boost in refinance volume.

Mortgage Bankers Association (MBA): Rates will average 6.7% in the third quarter and stay flat

According to the MBA May Mortgage Finance Forecast, the real estate finance association slightly revised its projection downward. The trade association now predicts the 30-year fixed-rate mortgage to average 6.7% in the third quarter of 2025 (down from 6.8%) and end the year at 6.6% (down from 6.5%). The MBA expects an average rate of 6.5% in the first quarter of 2026.

BOK Financial: Expecting rates to stay high in the coming months

“Based on recent inflation concerns across the economy, the Federal Reserve does not sound interested in rate cuts anytime soon,” says Michael Merritt, senior vice president of customer care and default mortgage servicing at BOK Financial and Forbes Advisor advisory board member. “As such, I expect rates to stay in the [high-6% to low-7%] range over the next few months—a similar range they have moved over the last month.”

Jome: Mortgage rate movement will depend on Fed, economy

“When it comes to mortgage rates and inflation, beyond the usual impact of monetary policy and natural inflation trends, we may see additional inflationary pressure from potential tariffs on major trading partners,” said Dan Hnatkovskyy, economist, housing market expert and CEO of Jome, a real estate company specializing in new construction home transactions. “This type of inflation could likely cause the Fed to pause rate cuts. … [B]ased on current trends and historical patterns, it seems unlikely that we’ll see significant declines in Fed rates or mortgage rates this year, given the added inflationary pressures.”

First American Financial Corporation: Elevated rates are staying put for a while

“A ‘higher-for-longer’ mortgage rate environment will continue to dampen house-buying power,” says Mark Fleming, chief economist at First American.

Bright MLS: Expect mortgage rates to bounce around in the coming months

“Mortgage rates are likely to jump around quite a bit over the coming months,” predicts Sturtevant, chief economist at BrightMLS, in recent commentary. “Buyers need to be prepared to work with a lender to be able to lock-in when rates do come down. While some buyers were hoping to wait for mortgage rates closer to 6%, it is likely that rates will still range in the mid-6% range at least into the summer.”

J.P. Morgan: Mortgage rates will remain above 6.5% in 2025

According to financial services firm J.P. Morgan’s February outlook for the U.S. housing market in 2025, “The higher-for-longer interest rate backdrop is here to stay, with mortgage rates expected to ease only slightly to 6.7% by the year end.”

Wells Fargo: Elevated mortgage rates to remain

Wells Fargo expects the spread between the 10-year Treasury note yield and 30-year fixed rate mortgage to compress by the end of the year. “Accordingly, we look for the 30-year fixed-rate mortgage to recede from a bit under 7% at present to roughly 6.5% by the end of 2025.”

TransUnion: Trade policy will keep mortgage rates elevated

“Due to the anticipated impacts of announced tariffs on near-term inflation, mortgage rates are expected to remain elevated above 6% in the next quarter,” says Satyan Merchant, senior vice president, automotive and mortgage business leader at TransUnion.

Current Mortgage Rate Trends

Many industry experts forecasted last year that rates would be closer to 6% by the end of 2024 and drift below this threshold by the first or second quarter of 2025.

Here’s how rates have trended over the past five years for 15- and 30-year mortgages.

When Will Be the Best Time To Refinance in 2025?

To evaluate whether or not a refinance would be realistic, you want to evaluate your reasoning. If the goal is debt consolidation, it could make sense, but if you’re trying to reduce the payment, it could be more challenging to achieve in the current higher-rate environment. The only way to know for sure is to speak with a mortgage lender to explore your options. — Jenn Bourque, loan officer at Empire Home Loans and Forbes Advisor advisory board member

Whether 2025 emerges as an ideal year to refinance depends on several factors, including the number of times the Fed cuts interest rates and by how much. The mortgage rate you got when you initially financed your home is another major factor.

Refinance rates tend to be higher than purchase rates, but the two typically move in tandem, suggesting refinance activity could gain greater traction if rates continue their downward trend.

Should You Refinance If You Already Have a Good Rate?

Over 40% of U.S. mortgages were originated in 2020 and 2021, when interest rates were at record lows. There were also some 14 million mortgage refinances during the same time.

If you were lucky enough to secure a mortgage during that period, 2025 may not be the ideal time to refinance, considering mortgage rates could stay well above 6% in the coming months.

“Most homeowners refinance to reduce their monthly mortgage payments with a lower interest rate,” wrote Archana Pradhan, an economist at CoreLogic, in a recent report. Pradhan adds that only about 12% of mortgage loans have a rate of 6% or more, many of which were originated in 2023 and 2024.

Recent Refinance Trends

Refinance activity was up at the beginning of May, but volume sagged in the remaining weeks. Year-over-year activity stayed strong throughout the month. Rates were mostly over 7% during the same time last year, so those who purchased in May 2024 and refinanced this May could have feasibly trimmed close to half a percentage point off their mortgage rate.

Even so, rates are still stuck well over 6.5%. If the Fed postpones another rate cut, this could indirectly maintain upward pressure on mortgage rates, impacting weekly refinance demand.

“Without a significant decrease in mortgage rates, origination activity for both purchases and refinances is likely to remain subdued,” said Merchant, in an emailed statement.

Here are recent trends in refinance activity, according to the MBA’s Weekly Mortgage Applications Survey.

2025 REFINANCE ACTIVITY WEEKLY ANNUALLY Week ending May 2 +11% +51% Week ending May 9 -0.4% +44 % Week ending May 16 -5% +27% Week ending May 23 -7% +37% See More See Less

Pro Tip Refinancing your mortgage can be a good financial move if you can qualify for a lower rate and shorten your loan term. Due to closing costs and fees associated with refinancing, many mortgage experts say refinancing makes sense only if you can reduce your current rate by at least 1%. Some strategies that could help whittle down your refinance rate include comparing rates from at least three refinance lenders, asking lenders about reducing closing costs, working to build your credit score, choosing a loan with a shorter term or buying discount points.

How To Shop for the Best Mortgage Rate

Rather than waiting it out for a rate that they like better, hopeful homebuyers should assess their personal financial situation—if the house is right for them, and the upfront and monthly payments are affordable, it could be the right chance to make a move. – Matt Vernon, head of retail lending, Bank of America

Getting an optimal rate on a home loan can save you a significant amount of money over time. Here are some tips that can help you get the best rate possible for your situation:

Keep your eye on rates. Mortgage rates are constantly changing. Keeping a close watch will make it easier to find and lock in a better rate.

Mortgage rates are constantly changing. Keeping a close watch will make it easier to find and lock in a better rate. Check your credit. When you apply for a mortgage, the lender will review your credit to determine your creditworthiness as well as your interest rate. In general, the higher your credit score

When you apply for a mortgage, the lender will review your credit to determine your creditworthiness as well as your interest rate. In general, the higher your Shop around and compare lenders. Consider options from as many mortgage lenders

Find Competitive Mortgage Rates Near You Compare lenders and rates with Mortgage Research Center Compare Rates

Frequently Asked Questions (FAQs)

How far will interest rates fall? We look at the latest forecasts

The Bank of England cut interest rates from 4.5 per cent to 4.25 per cent last month.

The decision came as little surprise to financial markets, with the 0.25 percentage point cut widely predicted by analysts. It followed the US Federal Reserve holding rates.

May’s meeting saw two Monetary Policy Committee members vote for a bigger 0.5 per cent drop in base rate, which indicates rate cut momentum is building.

The next decision is on 19 June. Markets are currently forecasting a further one or two 0.25 percentage point cuts by the Bank of England before the end of the year. This could mean interest rates reach 3.75 per cent by Christmas.

Future base rate decisions are likely to hinge not just on the rate of inflation, but also on the health of the overall economy, particularly in light of potential global trade wars.

The UK economy contracted by 0.3 per cent month-on-month, according to the latest figures from the ONS. This was worse than the 0.1 per cent decline anticipated by Bloomberg consensus.

The April pullback marks the first time GDP has declined significantly on the month since October 2024.

The Bank of England opted to cut interest rates to 4.25% in May. Its next decision is on 19 June

What next for interest rates?

At present, forecasters are pricing in one or two further interest rate cuts between now and the end of this year. This could see base rate fall to 3.75 per cent by the end of 2025 if the central bank continues with its 0.25bps cuts.

The market consensus is shared by many, although there are some that think base rate may be cut only once and will finish the year at 4 per cent.

However, there are some big organisations that are forecasting that the Bank of England will cut rates below the market consensus.

Analysts at Morgan Stanley are still predicting that UK interest rates will reach 3.25 per cent by the end of the year.

The US bank forecasts the Bank of England will keep cutting interest rates through the early months of next year with interest rates settling at 2.75 per cent in the first half of 2026.

Meanwhile, economists at Capital Economics say base rate will fall to 3.5 per cent by early 2026.

Paul Dales, chief economist at Capital Economics said: ‘This week’s labour market release was softer than expected and as a result, a cut in August suddenly looks more likely again.

‘Our forecast is for a cut in August. And we still think rates will be cut to 3.5 per cent early next year.

‘In fact, it’s becoming possible that they eventually fall further than that, perhaps to 3 per cent.’

Looking even further ahead than late 2025 and early 2026, economists vary on where they think interest rates will level off.

Santander, for example, thinks interest rates will remain between 3 per cent and 4 per cent for the foreseeable future.

However, economists at Oxford Economics are predicting base rate will eventually fall to 2.5 per cent in 2027 where it will broadly remain throughout 2028 and 2029.

The base rate and the Bank of England

The Bank of England moves what is officially known as bank rate but more commonly called base rate to try to control inflation.

Base rate is the single most important interest rate in the UK. It determines the interest rate the Bank of England pays to commercial banks that hold money with it and therefore influences the rates those banks charge people to borrow money or pay on their savings.

The theory is that raising interest rates lifts the cost of borrowing for individuals and businesses and thus reduces demand for it, slowing the flow of new money into the economy and applying the brakes.

In contrast, cutting interest rates lowers the cost of mortgage rates and other borrowing and increases demand, pushing the accelerator on the economy.

Higher savings rates also make saving more attractive, while lower rates encourage spending over setting money aside.

The MPC sets interest rates to try to keep consumer prices inflation (CPI) at the Bank and Government’s 2 per cent target.

> Interest rate rise and fall calculator: How moves affect your payments

Cause and effect: Inflation and wage growth are both factors that could determine what the Bank of England will do with base rate in the future

What’s happened to inflation and interest rates

A major inflation spike over recent years saw CPI rocket into double-digit territory, driven by the aftermath of the disruptive Covid lockdowns combined with an energy price crisis triggered by Russia’s invasion of Ukraine.

This saw the Bank of England raise base rate rapidly from its record low of 0.1 per cent, reached during the Covid pandemic years.

The first move up to 0.25 per cent came in December 2021 and a sharp series of rises from the MPC followed, driving base rate all the way up to 5.25 per cent in August 2023.

Rates were then held at 5.25 per cent until August 2024, when they were cut to 5 per cent. The next cut was to 4.75 per cent in November 2024 and then to 4.5 per cent in February.

The Consumer Prices Index rose by 3.5 per cent in the 12 months to April 2025, according to the ONS, up from 2.6 per cent in the 12 months to March.

Higher than expected inflation could lead to MPC members refraining from rate cuts.

The central bank expects inflation to stay temporarily above its 2 per cent target but fall back to target over the coming 12 months.

Mortgages and savings: Check the top rates you can get

The Monetary Policy Committee, led by Andrew Bailey, voted to cut base rate to 4.25 per cent in May

What a base rate cut would mean for savings and mortgage rates?

Many people assume that savings rates and mortgage rates are directly linked to the Bank of England base rate.

In reality, future market expectations for interest rates and banks’ funding and lending targets and appetite for business are what really matters.

Market interest rate expectations are reflected in swap rates. A swap is essentially an agreement in which two banks agree to exchange a stream of future fixed interest payments for another stream of variable ones, based on a set price.

These swap rates are influenced by long-term market projections for the Bank of England base rate, as well as the wider economy, internal bank targets and competitor pricing.

In aggregate, swap rates create something of a benchmark that can be looked to as a measure of where the market thinks interest rates will go.

Current swap rates suggest that mortgage rates won’t fall much further over the coming years.

As of 12 June, five-year swaps were at 3.67 per cent and two-year swaps were at 3.65 per cent.

Any borrowers hoping for a return to the rock bottom interest rates of 2021 will likely be disappointed. On the flipside, savers will be reassured that rates are not expected to plummet to the depths again.

It’s worth pointing out that while swap rates are a good metric for where markets think interest rates are going, they also change rapidly in response to economic changes.

Richard Carter of Quilter Cheviot adds: ‘Swap rates are a useful indicator of current expectations, but it is important to remember they are no better at predicting the future than any other economic indicator. The economic outlook can change very quickly and very dramatically.’

> Saving and banking: Read the latest on savings rates and top deals

What should savers do?

Experts foresee savings rates falling.

Savers can still get up to 4.75 per cent in an easy-access savings account and the best fixed rate savings offer up to 4.45 per cent.

Rachel Springall, finance expert at Moneyfacts said: ‘Savers are the ones who feel the force of cuts to interest rates, and to add insult to injury, will see no rise to any personal tax or savings allowances in the short-term, making cash Isas increasingly attractive.

‘Those savers who use their interest to supplement their income will feel overlooked if rates plummet.

‘In December 2021, the average easy access rate stood at a pitiful 0.2 per cent and it took months for this to rise above a measly 1 per cent – even though the Bank of England base rate had risen from 0.1 per cent to 2.25 per cent over that time.

‘Safe to say, it’s understandable that savers feel hard done by, barely seeing a return on their money and in fact, watching the true value of their cash eroded by unprecedented high inflation.

‘This could in turn, create an almost apathetic attitude among savers today, even as the average easy access account pays around 2.75 per cent, bank base rate is higher.

‘Shockingly, there are UK current or savings accounts out there earning no interest whatsoever.’

The good news is that with inflation at 3.5 per cent, it means savers who hold their cash in the top paying accounts will still be making a real return, albeit before tax.

Our savings tables show the best easy-access savings, top cash Isas and fixed rate savings deals.

The advice to savers has been to keep on top of the changing market if they want to secure a competitive deal.

Springall adds: ‘Challenger banks are offering attractive returns and it would be unwise to overlook them when they have the same protections in place as a high street bank.

‘Savers need to proactively keep on top of the best rates and review their pots regularly to see if they are getting a raw deal.’

> Sign up to our savings alerts and be the first to find out about top deals

What next for mortgage rates?

Mortgage rates have been drifiting upwards over the past couple of weeks as lenders re-price due to changes in sonia swap rates.

However, this is likely to stop and even reverse over the coming weeks as swaps have been falling this month.

The lowest fixed rate mortgages are currently just below 4 per cent and most borrowers will find they will be able to secure a rate of between 4 and 5 per cent depending on their deposit or level of equity.

Speaking to This is Money in a recent interview, property expert Phil Spencer said: ‘Predicting mortgage rates is a little easier, as the mortgage industry keeps a running tally of where it expects the Bank of England base rate to go.

‘While this measure – known as the swap rate – is constantly being updated, it does give useful clues as to the direction of travel for mortgage interest rates.

‘The swaps market is currently suggesting that there will be one more cut to the base rate in the second half of 2025, and this should lead to more mortgage rates that start with a 3 rather than a 4.

‘The picture for this time next year is less clear, but if inflation calms down from its current spike we should see mortgage rates continue to ease down – though it’s unlikely they’ll go back below 3 per cent any time soon.’

Will borrowers benefit from future base rate cuts?

Future base rate cuts are already largely baked into fixed rate mortgage pricing and means most borrowers won’t notice much difference when it comes to their mortgage rates – even with further base rate cuts down the line.

The bulk of outstanding residential mortgages are fixed rate and for the vast majority of these people, the base rate change won’t have any immediate impact anyway until their fixed term ends.

The mortgage borrowers who stand to benefit the most are those on tracker and variable rates.

Variable rate mortgages include ‘discount’ rates and also standard variable rates (SVRs). Monthly payments on all these types of loan can go up or down.

Tracker rates follow the Bank of England’s base rate plus a set percentage, for example base rate plus 0.5 per cent. They often come without early repayment charges, allowing people to switch whenever they like without incurring a penalty.

Standard variable rates are lenders’ default rates that people tend to move on to if their fixed or other deal period ends and they do not remortgage on to a new deal.

These can be changed by lenders at any time, and will usually rise and fall when the base rate does – but they can go up or down by more or less than the Bank of England’s move.

According to Moneyfacts, the average SVR is 7.48 per cent, which is a lot higher than the average of 4.4 per cent in December 2021 when base rate was just 0.1 per cent – but it will vary from lender to lender.

President Trump has been pushing the Federal Reserve to cut interest rates, writing on social media last month that the central bank has been “TOO LATE AND WRONG” in holding off on further reductions. Now, the Fed is set to meet on Wednesday to make its next rate decision — but Mr. Trump may need to wait longer to get his cuts.

The Federal Reserve is expected to hold its benchmark rate steady at its May 7 meeting, according to CME Group’s FedWatch. The group pegs the likelihood at 97% that the Fed will maintain the federal funds rate at its current range of 4.25% to 4.5%, the same level that it’s been at since December, when the central bank made its most recent reduction.

The Fed’s meeting comes at a time when the U.S. economy is sending mixed signals, with GDP unexpectedly falling into negative territory in the first quarter, while job growth topped forecasts in April. At the same time, Wall Street economists are hiking their recession risk for the U.S. economy due to the impact of Mr. Trump’s tariffs, which have hit imports from China with a 145% import duty — costs that are largely passed onto American consumers in the form of higher prices.

The Fed has signaled it will take a wait-and-see approach, with Powell saying at a speech last month that the central bank can stay patient while tariffs and other Trump administration economic policies play out.

“The Fed and investors find themselves in a no man’s land waiting to see whether economic policies drive prices higher and growth lower,” noted Scott Helfstein, head of investment strategy at Global X, in an email.

He added, “The reality is that corporate earnings have been pretty strong, the U.S. economy barreling along and the biggest cause for concern is sentiment. There isn’t a good reason to change rates at this point, and the Fed is likely to reiterate the need for more data with three rate cuts priced in for 2025, at this point starting in the summer.”

Here’s what to know about the Fed’s next meeting.

What date is the Fed’s next meeting?

The Federal Open Market Committee, the 12-member group that sets rate decisions, will meet on May 6-7, with the Fed announcing the FOMC’s decision on May 7.

What time is the Fed rate announcement?

The Fed will announce the rate decision at 2 p.m. EST on May 7, with Fed Chair Jerome Powell scheduled to discuss the committee’s decision at a press conference at 2:30 p.m. EST that day.

What are the odds of a Fed rate cut?

Very slim, with economists projecting 97% odds that the Fed will maintain its benchmark rate at its current range of 4.25% to 4.5%.

“Criticism from President Trump will not trigger a Fed policy response — neither an early cut without evidence of labor market deterioration, nor a stubborn refusal to cut once the labor market does soften, provided long-term inflation expectations remain anchored,” noted Goldman Sachs economist Jan Hatzius in a May 6 research note.

When is the Fed expected to cut rates?

Consumers eager for relief on borrowing costs are likely going to face a wait, according to economists.

Following the May 7 meeting, the Fed will next meet on June 18, with economists currently expecting the central bank to also hold steady then, according to CME FedWatch. Its polling finds a 70% likelihood that the Fed will maintain its benchmark rate at 4.25% to 4.5% at that meeting.

However, it’s more likely the Fed could slash rates at its July 30 meeting, with the probability of a rate cut sitting currently at 80%, FedWatch notes.

But some economists expect the central bank to hold off even longer.

“We think the Federal Reserve will aggressively cut interest rates next year, as tariff-induced inflation begins to fade and the labor market shows more troubling signs,” noted Oxford Economics Chief U.S. Economist Ryan Sweet, who says he believes the first cut will occur in December.

Why does Trump want a rate cut now?

Mr. Trump argues that inflation has steadily cooled and high borrowing costs are no longer needed to restrain price increases. The Fed sharply ramped up its short-term rate in 2022 and 2023 as pandemic-era inflation spiked.

On Friday, Mr. Trump said on his social media platform Truth Social that there is “NO INFLATION” and claimed that grocery and egg prices have fallen, and that gas has dropped to $1.98 a gallon.

But those claims are not entirely true: Grocery prices have jumped 0.5% in two of the past three months and are up 2.4% from a year ago. Gas and oil prices have declined — gas costs are down 10% from a year ago — continuing a longer-running trend that has continued in part because of fears the economy will weaken. Still, AAA says gas prices nationwide average $3.18 a gallon.

What does the Fed’s decision mean for your money?

Borrowers who are looking for relief on loan and credit card rates will have a wait ahead of them, experts say.

“There’s just so much uncertainty in the economy now,” said Matt Schulz, chief consumer finance analyst for LendingTree, in an email. “No one quite knows what the next few months will look like, but what does seem clear is that Americans are going to have wait at least a little longer for the Fed to cut rates.”

Schulz predicts that credit card rates could tick higher in the next few months, as well as auto loan rates.

“Banks are nervous about all of the uncertainty in the economy and what it means for consumers,” he noted. “When that happens, banks try to minimize risk as much as possible, and one of the ways they do that is to raise interest rates on credit cards.”

Because of that, consumers should focus on shopping around for the best rates they can find, as well as considering transferring existing high-interest credit card debt to 0% balance transfer cards, Schulz added.