The Federal Reserve, while still raising interest rates, is indicating that a rate plateau may be on the horizon. However, it’s not a given that personal loan rates will fall anytime soon.

At least until 2024, a majority of economists agree that borrowers can anticipate the Fed slowing its record-breaking rate hikes before seeing a significant drop in lending costs.

Interest rates hit highest level in over 20 years

On Wednesday, July 26, the Federal Reserve raised the key interest rate by 0.25 percent, bringing the average personal loan rate to a whopping 11.27 percent. Not only is this the highest rate the consumer lending industry has seen in an upwards 20 years, but it is the 11th hike in its last 12 meetings.

While the most recent rate hike isn’t indicative of the Fed moving in one direction or another, it’s not a sign that lenders will be dropping rates anytime soon.

Most economists predict interest rates to slow come 2024, some say 2025 

Bankrate’s quarterly Economic Indicator Survey found that nearly 4 out of 5 economists who responded predict that the Fed will begin to cut rates in 2024, while 17 percent predicted that borrowers won’t see any cuts until 2025.

“While the bulk of the Federal Reserve’s aggressive interest rate hikes are certainly behind us, the prospect of a pronounced drop in rates for products like personal loans is likely some ways off.”

— Mark HamrickSenior economic analyst at Bankrate and Washington bureau chief

He adds that at least one more rate hike is likely to occur later in the year, during the fall or winter.

Rather than seeing personal loan rates dramatically shift toward one direction or the other, it’s more likely that rates will stabilize or remain elevated until there’s a change in the economic outlook, Hamrick advises.

The future of lending costs is purely speculative at this point

While it would be ideal for prospective borrowers to have a concrete timeline as to when personal loan rates are expected to drop, the economy is too turbulent to make such predictions.

“If there’s one lesson we’ve had slap us in the face over the past few years, it’s that we live in a world of rapid change and volatility,” Hamrick says. When referring to how, when and why the Fed’s trends of increasing rates would be reversed is unknown at this time. However, he asserts that if the economy continues to hold up, then the cost of borrowing could be easier to access at a lower cost.

“But this is speculation at this point. How the future unfolds remains to be seen,” he concludes.

Borrowers need to be increasingly more creditworthy to get approved

Should the Fed follow the predicted trends and carry the high rates into 2024, prospective personal loan borrowers will likely need to have stellar credit and a near-flawless financial portfolio to get approved with most lenders.

If rates were to drop, lender’s would be more likely to adopt more lenient approval odds. However, as there is the potential for at least one more rate increase this year, lenders are predicted to remain tight in an attempt to protect themselves.

“The other factor working against borrowers is tighter lending on the part of financial institutions,” says Hamrick. He explains that this has been evident since before the bank failures in March, and that the tightened approval dynamic between lenders and borrowers has become more evident.

“This means that borrowers will need to be reasonably well qualified with higher credit scores,” he says, adding that the cost of high financing will be sticking around for a while.