More interest rate cuts in prospect in 2025. But experts warn not to wait with these money movements

That of the Federal Reserve expected rate reduction of a quarter of a percent The trajectory of sky-high interest rates is unlikely to change much on Thursday, but experts predict further cuts in December and throughout 2025. So should you start making money moves now in anticipation of lower interest rates?

Rate cuts by the Fed often make big headlines because they are indicative of experts’ views on the health of the economy. While the federal funds rate may not directly impact your individual borrowing or savings rate, changes can occur over time Rates can affect many aspects of your finances.

But if you’re working to build a solid financial framework that can withstand interest rate cuts and increases, don’t let the latest news send you into a panic and change your plans.

“We see any form of economic news as an indicator or reason to potentially change course,” says Ariel Nathanson, certified financial education instructor, founder of Finance for feminists. “If we’re grounded and intentional and clear about our own financial plan and where we’re going, that (news) is kind of background noise.”

Moreover, the Fed tends to move incrementally cut in September was considered large, but it was still only half a percent – ​​so the impact is likely to be gradual.

We asked the experts when we’ll see interest rates really start to drop, and what we should do with your money to prepare.

Should you plan for interest rate cuts in 2025?

Even among most economists predict even more interest rate cuts don’t expect a dramatic change all at once in 2025. It takes time to implement each change, and the impact on you will likely be delayed.

In addition to the Fed meeting, there’s a constant stream of economic news that may have you wondering whether you should change your money management strategy. But don’t let any news story make you panic or dramatically change course, Nathanson advised.

“The average person…can’t keep up with all these to-dos,” she said. “Just stay focused on what’s important to you.”

Here’s some advice you might encounter as interest rates fall – and what the experts have to say about it.

Should you save or invest?

When the federal funds rate falls, the interest you can earn through a savings account or certificate of deposit also tends to decrease. That may leave you wondering whether you should dip your savings in favor of investments that don’t move with interest rates.

First, it’s important to understand the purpose of each of your short- and long-term savings instruments.

For example, Nathanson said, “Savings are not supposed to be our greatest wealth builder.” That money can be put in one savings account with high returnseven if the API goes down because its purpose is to be available when you need it, not to grow as quickly as possible.

If it’s yours pension fundOn the other hand, you’ll probably want to put the money somewhere where it can grow faster than the rate of inflation over decades.

Sloane Ortel, head of investments at Ethical capital investment cooperativesuggests working with an advisor as circumstances change to ensure your money stays on track to achieve its goal.

If CDs are already part of your savings and investment plan for the near future, now may be a good time to buy in as interest rates have already started to drop. You can still have one high rate before Fed rates are likely to fall next year.

Do you need to refinance your mortgage?

If you’ve purchased a home in the last few years, your mortgage interest rate could be anywhere from 6% to 8% APR. The recent rate cut by the Fed may make you hopeful refinancing and save money soon.

But due to a variety of other factors, including conflicting economic news and election uncertainty, mortgage and refinancing rates have soared recently. Experts don’t expect a refinancing boom soon.

Rates are expected to start falling gradually next year, so it will be some time before the change is big enough to help a borrower save significantly.

Still, like refinancing can help you in another waysuch as paying out equity on your home or extending your repayment term, it can make sense regardless of what interest rates are doing.

Should you consider buying real estate?

In a recent one CNET investigationonly 4% of adults said they would consider buying a home with a 6% mortgage rate. However, if mortgage rates fell to 4% or lower, half would consider doing so.

But if interest rates drop next year, does that necessarily mean it’s a good time to buy a house (or second home)?

Advisors warn against being guided by interest rates alone. Instead, consider your finances and your willingness to become a homeowner, Ortel says.

“Do you have the financial stability or the savings?” Ortel said. “Do you have the stability that supports you in owning a home? Have you identified a home you want to live in for years to come?”

Nathanson pointed that out too house prices are “still very unaffordable” for many buyers.

“It may seem incoherent or incongruous to hear these financial experts say it’s a good time to buy a home… when that may or may not reflect your actual economic reality,” she said.

Both Ortel and Nathanson emphasized the importance of making key financial decisions based on your individual circumstances and goals, rather than market conditions. Many factors determine whether it is the right time for you to buy real estateSo don’t let interest rates alone influence you.

Should you wait before taking out a loan?

If you need money now for other purposes – like buying a new car or taking care of a medical emergency – don’t be deterred by the Fed’s stubborn interest rate. A personal loanIf you have access to it, you’ll likely get a much lower interest rate than financing large purchases with credit cards, so this may be your best option.

This is also possible if you finance the loan over several years refinance later if rates drop significantly and your credit remains intact.

Even though car loans are at an all-time high right now, if you need to finance a car to get to work, shop around for the best offer. If you can wait to buy a car, it may be worth holding on a little while to see if interest rates start to drop next year.

What does the Fed rate say about the labor market?

The main reason the Fed rate makes headlines is that it signals something is happening in the larger economy. This is usually followed by a drop in interest rates slowing inflationrising unemployment or both. The recent historically high interest rate was intended to cool the economy as inflation rose due to post-pandemic demand. September’s rate cut was an indication that inflation has slowed enough, and the Fed wants to prevent the economy from cooling further and impacting unemployment.

But a rate cut does not necessarily mean that experts expect a rise in unemployment.

Aside from the temporary effects of this fall’s hurricanes and strikes, unemployment has remained largely flat, near the 4% that economists consider efficient. Inflation yes almost down to the Fed’s target of 2%. This combination is what economists call a “soft landing”: a recovery from high inflation that did not put us into recession.

However, hiring has fallen. Further interest rate cuts in 2025 could allow companies to invest in more staff and prevent unemployment from rising further, but that remains to be seen.

While you see headlines about the Fed rate in 2025, look further to see how it compares to the hiring rate. This indicator could be the indicator that actually has the most impact on your financial situation in the coming year. If you’re worried about layoffs, now’s the time to start building an emergency fund so that you have some money to cover living expenses if you lose your job.