There’s a common saying about interest rates: They take the elevator down and the staircase back up. The metaphor highlights just how swiftly the Federal Reserve tends to slash borrowing costs, often during economic crises — and how gradually they then lift them when the economy is healing.

None of that has been the case during the hottest inflation surge in four decades.

You might as well say borrowing costs took the escalator up. In just a 16-month span, officials on the Federal Open Market Committee (FOMC) lifted their key benchmark rate from near-zero percent to a 22-year high of 5.25-5.5 percent. And now, with U.S. central bankers signaling they’re preparing to cut borrowing costs at some point this year, it’s looking like rates are going to opt for the staircase on their journey downward.

The Federal Reserve is likely going to cut rates only twice this year, as inflation takes longer to slow than U.S. central bankers currently think, according to the 2024 interest rate forecast from Bankrate’s chief financial analyst Greg McBride, CFA. That’s one cut fewer than U.S. central bankers themselves are expecting for the year ahead, according to their most recent rate projections from December. It’s also considerably less dovish than investors currently think. Markets are pricing in six quarter-point cuts at all but two Fed meetings in 2024, CME Group’s FedWatch tool shows.

Any rate cuts from the Fed will help make it cheaper to borrow money. Illustrating that point, McBride expects that every form of consumer borrowing — from the price of financing a car to the cost of tapping into your home’s equity — will get cheaper this year.

But those moves might not offer much relief. Two rate cuts from the Fed would take its key benchmark interest rate back to where it was in March 2023 — a level, at the time, that hadn’t been seen since 2007. The key rates on consumer loan products are also expected to hold at the highest level in more than a decade, McBride’s forecast shows.

The one advantage for consumers: McBride expects savings yields to hold higher than at any point since the financial crisis, and the best offers on the market will continue to outpace inflation. He’s estimating that price pressures will slow another half a percentage point over the course of 2024.

Here are the key findings from Bankrate’s 2024 interest rate forecast.

We are in a high interest rate environment, and we’re going to be in a high interest rate environment a year from now. Any Fed cuts are going to be modest relative to the significant increase in rates since early 2022. — Greg McBride, CFA | Bankrate chief financial analyst

Mortgage rates will drift lower but remain at a decade-plus high

Mortgage 30 Year
  • 30-year fixed-rate mortgage: 5.75%
    • Change: -1.15 percentage point
  • Highest since 2009

Mortgage rates ended 2023 with a cooldown almost as fast as the surge.

The key home-buying rate started out the year on a downward slope, sinking to 6.27 percent in early February after kicking off the year at 6.71 percent. But it then quickly zig-zagged its way to new heights, topping 8 percent for the first time since 2000 by the end of October 2023.

That major surge — 1.74 percentage point from peak to trough in 2023 — has nothing on the massive increases that prospective homebuyers found themselves helpless to in 2022. The year the Fed began raising interest rates, mortgage rates soared almost 4 percentage points, an unprecedented leap.

Still, last year’s mortgage rates didn’t make the prospect of buying a home much easier. A $500,000 30-year fixed mortgage would’ve cost $2,089 a month in principal and interest back when rates were at a record low of 2.93 percent, according to Bankrate’s mortgage calculator. That monthly payment would now be $3,293 — a 58 percent increase — with a 30-year fixed mortgage rate of 6.9 percent. Falling mortgage rates have shaved about $400 off of what they would’ve cost when they were hitting 8 percent.

Further moderation in inflation this year will cause the 10-year Treasury yield to retreat even more from its current level. McBride is penciling in a 3 percent yield for the key bond rate, down from where it ended the year at 3.88 percent. That’s likely to drive the 30-year fixed-rate mortgage even lower to 5.75 percent, he predicts.

It might be a bit of a bouncy journey, though, McBride says. Mortgage rates will spend the bulk of the year in the 6-percent range, he expects, with movement below 6 percent confined to the second half of the year.

But that decrease will take the key home-financing rate back only to 2022 levels. And before the Fed’s rapid rate hikes, mortgage rates hadn’t hit this high of a level since 2009.

Meanwhile, the drop in mortgage rates might not do much to fix major affordability issues in the U.S. housing market. In some ways, it risks exacerbating the issue.

“If bond yields and mortgage rates are in a slow descent consistent with more tepid economic growth and easing inflation pressures, then it’s probably not going to fuel an increase in home prices,” McBride says. “But if mortgage rates fell suddenly, that could bring enough demand into the marketplace that you could see a price pop with the very limited supply that still exists.”

For more details, read Bankrate’s mortgage rate forecast.

Home equity loans will continue to be a high-cost form of debt in 2024

  • HELOC: 8.45%
    • Change: -1.67 percentage point
    • Highest since 2001
  • Home equity loan: 8.5%
    • Change: -0.45 percentage point
    • Highest since 2009

It was the end of an era for homeowners hoping to take advantage of a record amount of home equity in 2023: Home equity’s reign as a lower-cost form of debt came to a swift end.

Throughout the year, rates on home equity lines of credit (HELOCs) and home equity loans steadily climbed. But it all came to a head in November 2023. The average HELOC rate topped 10 percent, the highest level in records dating back more than 31 years. Home equity loan rates, meanwhile, pushed close to 9 percent.

From start to finish, HELOC rates surged 2.5 percentage points, while home equity loan rates jumped more than a percentage point. The speed of the surge was surprising for a form of debt closely tied to the federal funds rate, McBride says.

McBride even estimates that home equity borrowers had been seeing those record-high levels long before they showed up in Bankrate’s survey, as introductory offers likely held down the national rate. Once a few of them expired, however, reality came crashing in.

“Home equity is no longer low-cost debt,” McBride says. “It is high-cost debt, and it’s going to take a lot more than two interest rate cuts by the Fed to change that.”

McBride’s forecast shows the average HELOC rate falling to 8.45 percent by the end of 2024, more than 1.5 percentage point lower than where it settled at the end of 2023. The average home equity loan rate is projected to fall nearly half a percentage point from its current level to 8.5 percent. Both of those levels would still be among the highest in years — if not decades.

“Those rates are so high that it’s not something you would choose to do as much as you would need to do,” McBride says, referring to homeowners leveraging their equity. “It’s because you need to replace the roof and that’s the source of funds; you have much needed repairs or upgrades. In lieu of cash available to pay for it, home equity becomes the alternative.”

Not all homeowners can time the market, and one silver lining for the year ahead is the U.S. economy’s continued resilience. The financial system avoiding a recession means lenders may be more inclined to bring back some attractive introductory offers — though whether borrowers can take advantage of them depends on their credit score.

“Make sure your credit is in tip-top shape, and shop around to see the best rates,” McBride says. “Those are the two things you can do to move the needle and get yourself a better rate. The biggest impact on the rate you get next year isn’t going to be what the Fed does.”

For more details, read Bankrate’s home equity interest rate forecast.

Auto loan rates will fall, but subprime borrowers could still feel pinched

Auto Car
  • Five-year new car loan: 7%
    • Change: -0.71 percentage point
    • Highest since 2010
  • Four-year used car loan: 7.5%
    • Change: -0.79 percentage point
    • Highest since 2008

A widening between the haves and the have-nots could also be a key theme for auto loans this year.

Rate cuts from the Fed will take some of the edge off of the rising cost of financing a car. McBride expects five-year new car loans to hit 7 percent from their current 7.71 percent level, while four-year used car loans could creep lower to 7.5 percent from 8.29 percent. Competition between lenders could also “rev up a bit” if the economy keeps avoiding a recession, McBride says, leading some firms to offer better rates than others.

Lenders, however, reserve their best offers for those with the most attractive credit profiles.

“Borrowers with weaker credit will still find a road marked by tight credit and double-digit interest rates,” McBride says.

New and used car prices have started to decline since supply shocks, manufacturing snarls and empty for-sale lots began pushing up prices in the aftermath of the pandemic. Yet, they’re still pricier today than they were before the outbreak.

New vehicle prices have surged 21 percent since February 2020, while used car prices are up a whopping 51 percent, data from the Bureau of Labor Statistics shows. Kelley Blue Book data shows that the average monthly car payment is nearly $800 — a “budget buster,” as McBride calls it.

The one-two punch of expensive prices and high financing costs has especially pinched borrowers with credit scores between 501 and 600. Delinquency rates for those in the so-called “subprime” credit category are the highest since Bill Clinton was president.

It’s an issue that’s been building for years, McBride says. Borrowers have been stretching out their loan terms to make their monthly payments more affordable, a move that can also keep them from building equity as quickly. That could harm their chances of refinancing or making a trade in — especially if those borrowers owe more money than their car is worth.

“That could be a catalyst for financial distress for households, and it also is increasingly difficult to get yourself out from under it,” McBride says. “There’s no wiggle room, there’s no dialing it down if it’s tight one month. If you miss one or two payments, it’s not going to be in the driveway in the morning.”

For more, read Bankrate’s auto loan rates forecast.

Yields may have peaked, but slowing inflation will be a major win for savers

  • Money market account: 0.35%
    • Change: -0.12 percentage point
    • Highest since 2009
  • 1-year CDs (national average): 1.15%
    • Change: -0.62 percentage point
    • Highest since 2009
  • 1-year CDs (highest-yielding): 4.25%
    • Change: -1.41 percentage point
    • Highest since 2008
  • 5-year CDs (national average): 1%
    • Change: -0.43 percentage point
    • Highest since 2012
  • 5-year CDs (highest-yielding): 4%
    • Change: -0.75 percentage point
    • Highest since 2009
  • Savings accounts (national average): 0.3%
    • Change: -0.32 percentage point
    • Highest since 2009
  • Savings account (highest-yielding): 4.45%
    • Change: -0.9 percentage point
    • Highest since 2008

Yields on deposit accounts have likely already peaked, but the wins for savers won’t be over in 2024 — even if banks start cutting back on offers. Yields are expected to remain at the highest levels in over a decade despite two rate cuts from the Fed, McBride says.

The average yield on a 1-year certificate of deposit (CD) should fall to 1.15 percent nationally in the year ahead from its current 1.77 percent level, according to McBride’s 2024 forecast. Meanwhile, the average rate on a 5-year CD should edge lower to 1 percent from 1.43 percent.

Yet, their top-yielding counterparts are expected to hit 4.25 percent and 4 percent, respectively. Those are still higher than at any point since the Great Recession of 2007-2009.

The same story is true for savings accounts. Those yields are expected to sink to 0.3 percent by the time 2024 comes to a close, though the highest-yielding offers on the market will hit 4.45 percent, according to McBride’s forecast. Money market accounts will edge lower to 0.35 percent. The best news of all: Moderating inflation means the money you have sitting on the sidelines won’t lose as much purchasing power. If you keep your savings in the right account, your returns will likely outpace price pressures.

McBride compares it to a worker’s gross and net pay. Gross pay may be what workers fixate on, but net pay after taxes and other withholdings is what pays the bill.

“It will still be a banner year for savers when those returns are measured against a lower inflation rate,” McBride says. “In 2024, shopping around for better yields will mean out-earning inflation. Not shopping around and settling for average will mean trailing inflation.”

For more, read Bankrate’s forecast on CD rates and Bankrate’s forecast on savings and money market accounts.

Credit card rates will edge off their record highs but remain pricey

Credit Card
  • Credit card: 19.9%
    • Change: -0.84 percentage point
    • Still among the highest levels ever recorded

Carrying a credit card balance has never been cheap. Even when the Fed’s key rate held near zero, credit card rates hovered around 16 percent, Bankrate rate data shows.

An aggressively hawkish Fed has made the consequences of credit card debt even worse. Credit card rates first eclipsed 19 percent — a record high — in November 2022. Throughout 2023, they climbed even higher as the Fed kept raising rates.

Making minimum payments to eliminate the average credit card balance of roughly $6,000 would cost 25 years of borrowers’ time — and close to $10,000 in interest, Bankrate’s credit card payment calculator shows.

Bankrate’s forecast projects only modest relief. McBride expects that the average rate will hold above 20 percent for most of the year and eventually dip to 19.9 percent by the end of 2024 as the Fed cuts rates. That would take almost a percentage point off its latest record high: 20.74 percent during the week that ended on Dec. 27.

Credit card rates follow the prime rate, which closely tracks the federal funds rate. Within one to two billing cycles after any rate move, Americans should see a difference on their monthly statement.

Eliminating credit card debt should continue to be one of Americans’ top financial priorities in the new year. Even better news for borrowers, the financial system avoiding a recession means Americans shouldn’t have a hard time next year finding balance transfer cards with 0 percent annual percentage rate (APR) introductory offers.

In fact, one of the reasons McBride expects credit card rates to fall even faster than the Fed’s key rate next year is because he expects the U.S. economy to continue avoiding a recession.

“That’s going to be your easiest escape hatch from 20 percent credit card debt,” he says. “Taking advantage of low-rate balance-transfer offers can help you accelerate debt repayment.”

For more details, read Bankrate’s credit card forecast.

See how our 2023 rate forecast performed

Last year was another volatile year for interest rates. The 30-year fixed-rate mortgage technically closed out 2023 just 19 basis points above its starting position, but that’s after climbing from a low of 6.27 percent to 8.01 percent — a whopping 174 basis point surge in just an eight-month span.

The 30-year fixed-rate mortgage wasn’t the only unpredictable interest rate. HELOCs blew past 10 percent, while car loans topped the highest in over 10 years.

Rapid-fire interest rate increases for consumers are just another feature of a U.S. central bank raising interest rates faster than any other point since the 1980s — and the U.S. economy evolving in a way that’s been impossible to forecast.

“We’re much better off with an economy that held up well,” McBride says. “If the only price we had to pay for that is higher rates, we’ll take it.”

Here’s how much more borrowing costs — and savings yields — climbed than experts expected.