- Most top high-yield savings accounts stand at the 4% to 5% APY range heading into 2025.
- Savings account rates are likely to drop in 2025, although the Fed's decisions may impact pacing.
- Despite rate drops, a high-yield savings account is still good for savings goals or emergency money.
The best high-yield savings accounts currently pay around 4% to 5% APY (Annual Percentage Yield), but market conditions are changing.
The Federal Reserve cut interest rates three times in 2024 and as outlined in the Summary of Economic Projections, more rate cuts could happen in 2025.
Cuts to the federal funds rate influence declines in savings account rates, which is why we're already seeing fewer 5% interest savings accounts offered.
Will savings rates continue to drop in 2025? We'll explain the savings rates forecast for 2025 and how to determine if you should open a high-yield savings account.
Will bank savings interest rates go down in 2025?
It's likely savings interest rates will decline in 2025 if the Federal Reserve continues to cut interest rates. In 2025, you'll likely see top high-yield savings rates dip below the 4% to 5% range, and average savings account interest rates under the current rate of 0.41% APY.
The CME FedWatch Tool also shows a high likelihood of several rate cuts occurring in 2025.
The Federal Reserve considers existing economic conditions to decide if rate cuts are needed, which means that projections could change. Already, the Federal Reserve adjusted its Summary of Economic Projections in December to pencil in fewer projected rate cuts than originally projected in September.
That said, even if conditions change and there are fewer rate cuts than what are anticipated, there's still a 99.6% chance of the Federal Reserve easing rates by December 2025.
Each bank also sets its own criteria for changing bank account interest rates, so you might see that some institutions will drop their savings rates incrementally while others will wait before implementing a larger rate cut.
Recap of 2024 high-yield savings account rates
At the beginning of 2024, savings account interest rates maintained the high APYs offered in 2023. Interest rates on high-yield savings accounts were around 5.00% to 5.50% APY.
High-yield savings accounts maintained competitive interest rates because the Federal Reserve wanted to see inflation get closer to 2%, which took longer than expected. Individual bank account interest rates may have fluctuated a bit, but consumers were still able to reap the rewards of high-yield savings rates hovering around 5% APY.
Savings account interest rates started going down more in mid-2024 because market conditions began to change. At the September Fed meeting, the Fed cuts interest rates by 50 basis points, meaning it was a larger cut.
It also cut rates again in November and December by 25 basis points each, which has influenced current high-yield savings rates that are paying close to 4% to 5% APY.
Should still I open a high-yield savings account if rates are dropping?
You may still want to open a high-yield savings account if you're contributing money to short-term savings goals or establishing an emergency fund.
"High yield savings account makes sense for dollars that you need to be liquid and accessible," explains Marguerita Cheng, CFP® professional and CEO at Blue Ocean Global Wealth.
Cheng adds that goals with a timeframe of three years or less make sense in a high-yield savings account because you don't want to take risk and lose money by investing money instead.
Keep in mind that high-yield savings accounts have variable interest rates, not fixed rates. This means that while some high-yield savings accounts currently pay around 4% to 5% APY, your rate could increase or decrease at any time. That said, high-yield savings accounts still pay more than traditional savings accounts at big brick-and-mortar banks, regardless of rate fluctuations.
If you locked in a high CD rate, however, you would be able to keep the same rate for the full term. For example, if you opened a 1-year CD, it would maintain the same rate for one full year starting on the date you opened it. However, if you need to withdraw money during the CD term, you would have to pay a penalty.
Choosing between a high-yield savings account and a CD will depend on the timeline of your savings goal and whether you need immediate access to your savings. You have to decide whether it's worth locking in at a high rate or if there's another place that's more suitable for your money.
Savings rate forecast FAQs
Money market account rates are expected to drop in 2025, similar to savings and CD rates. The Federal Reserve's decisions will influence changes in money market account rates. Since several Fed rates are likely to occur, money market account rates are likely to drop throughout the year.
Yes, the interest rates on high-yield savings accounts are likely to drop more in 2025. When the Federal Reserve begins cutting rates, savings rates may start dropping. It's still worth opening a high-yield savings account, though, because they can be useful for emergency savings or specific savings goals.
If savings rates go down in 2025, assess your financial goals and determine whether your money is in the right place. Savings accounts and money market accounts could be good spots if you need to access your savings regularly, while CDs may be appealing for money you don't need to access immediately. You could also consider investing for long-term financial goals.
Yes, you could open a CD and maintain a fixed interest rate for a specific term. If you want to take out money during the term, you'll have to pay an early withdrawal penalty. Also, keep in mind that the CD rate forecast also indicates that CD rates will likely start dropping more in 2025.
