Prediction: High-Yield Savings Rates Will Fall Below 4% in 2025

For over a year, rates of at least 4% have been the norm for high-yield savings accounts. Some of the best savings accounts are even offering APYs of over 5%. It's a good time to have money in savings.

Alas, nothing lasts forever. After a recent rate cut by the Federal Reserve, savings rates have already come down a little from where they were earlier this year. And with more potential cuts on the horizon, 4% rates could become a thing of the past.

Don't get attached to your saving account's APY

While every bank sets its own interest rates, it uses the federal funds rate as a guideline. The Federal Reserve controls the federal funds rate. It meets eight times a year to decide whether to maintain the current federal funds rate, cut it, or increase it.

The Fed had been keeping rates high to fight inflation. Since inflation has been dropping, the Fed cut rates by half a percentage point in September. In response, banks lowered the rates on their high-yield savings accounts. For example, mine went from 4.40% to 4.10%.

Our Picks for the Best High-Yield Savings Accounts of 2024

Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.80% Rate info 3.80% annual percentage yield as of December 29, 2024. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.80% Rate info 3.80% annual percentage yield as of December 29, 2024. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.	$0	Open Account for Capital One 360 Performance Savings On Capital One's Secure Website.
Western Alliance Bank High-Yield Savings Premier Member FDIC. APY 4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website. Member FDIC.	4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	$500 to open, $0.01 for max APY	Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website.

As I wrote above, there are still high rates available, generally ranging from about 4% to 5%. But there are probably more rate cuts coming. The Fed's next meeting is Nov. 6–7. The current probability of a quarter-percentage rate cut is 93.1%, according to CME Group's FedWatch tool.

In total, rates are expected to decrease by another half a percentage point this year and another 1 percentage point in 2025, according to the Fed's dot plot projections. Many high-yield savings accounts will likely have rates below 4% after another rate cut. With multiple rate cuts, it may be impossible to find savings accounts paying as much as 4%.

It's not as bad as it sounds

Lower savings rates are a bummer, especially if you've gotten used to hefty interest payments. Keep in mind that rate cuts won't necessarily take a huge bite out of your earnings. If your savings account's APY drops by 1%, that seems like a lot. But for every $1,000 in savings, it only comes out to $10 per year in interest.

It can also help to look at the positive side of falling interest rates. They're happening because inflation is dropping, which is good for consumers. Rate drops also mean you can get a better deal when borrowing money. That's welcome news for anyone planning to apply for a mortgage.

If you want to keep earning as much interest as possible, it helps to have your money in the right account. In that case, consider the Western Alliance Bank High-Yield Savings Premier account. It has a 4.46% APY, one of the highest rates I've found, and no monthly fees. Click here to learn more and open an account today.

Deciding what to do with your savings

A high-yield savings account is still one of the best places for your savings. You'll earn a competitive APY with this type of account, even if it isn't quite as high as before. You'll also be able to withdraw money at any time without penalties.

There's another option that allows you to lock in rates while they're high: a certificate of deposit (CD). You won't be able to withdraw your money whenever you want -- you need to keep it in your CD for the entire term to avoid an early withdrawal penalty. In return, you get a fixed APY for the duration of the CD.

Want to lock in a high APY with a CD? Check out our picks for the best CDs, with terms ranging all the way from one month to 10 years.

It's not guaranteed that savings rates will keep dropping, but it's the most likely scenario. Now that you know what could be coming, you can decide if you want to put your savings in a CD or stick with a high-yield savings account.