What is the prime interest rate?
The prime interest rate is the percentage that U.S. commercial banks charge their most creditworthy customers for loans. Like all loan rates, the prime interest rate is derived from the federal funds' overnight rate, set by the Federal Reserve at meetings held eight times a year.
The current Bank of America, N.A. prime rate is 8.50% (rate effective as of July 27, 2023).
The target federal funds rate, which is set by the Fed, serves as the basis for the prime rate. The federal funds rate is the interest rate commercial banks charge each other for overnight lending. Generally, the prime rate is about 3 percent higher than the federal funds rate.
Right now, the Fed interest rate is 5.25% to 5.50%. The FOMC established that rate in late July 2023. At its most recent meeting in March, the committee decided to leave the rate unchanged. March 19-20, 2024.
What was the highest prime rate? The highest prime rate was 21.5%, reached on December 19, 1980.
Basic Info
Bank Prime Loan Rate is at 8.50%, compared to 8.50% last month and 7.82% last year.
Interest rates have held steady since July 2023.
The Fed raised the rate 11 times between March 2022 and July 2023 to combat ongoing inflation. After its December 2023 meeting, the Federal Open Market Committee (FOMC) predicted making three quarter-point cuts by the end of 2024 to lower the federal funds rate to 4.6%.
United States Prime Rate. target range for the fed funds rate at 5.25% - 5.50%. interest rates will be on May 1, 2024. The U.S. Prime Rate is a commonly used, short-term interest rate in the banking system of the United States.
If you lock in a fixed mortgage rate with a lender, the prime rate won't affect the rate you receive. Specifically, fixed-rate mortgages are usually lower than the prime rate because lenders sell mortgages to major mortgage investors, such as Fannie Mae and Freddie Mac.
What is the US prime rate forecast?
US Prime Rate Forecast is at 5.76%, compared to 5.76% last quarter and 5.76% last year. This is lower than the long term average of 5.82%.
The Wells Fargo Prime Rate is 8.50% as of 07/27/2023.
The average 30-year fixed mortgage rate as of Thursday was 6.99%. By the final quarter of 2025, Fannie Mae expects that to slide to 6.0%.
| Effective Date | Rate |
|---|---|
| 3/16/2020 | 3.25% |
| 3/4/2020 | 4.25% |
| 10/31/2019 | 4.75% |
| 9/19/2019 | 5.00% |
In slower economies, the FOMC tries to keep the federal funds rate low to encourage borrowing, which leads to spending and investing, but when the economy grows quickly, the FOMC might raise the rate to offset and balance the economy. The prime rate, in turn, is based on the federal funds rate.
The study revealed that the average interest rate across all 50 states was 4.84%, with the lowest being 4.74% and the highest 4.96%. California, New Jersey, Washington and Massachusetts had the lowest average interest rates, while New York, Iowa and Arkansas had the highest.
The prime rate isn't determined by the Fed, but instead by individual banks. However, the prime rate is influenced by something called the federal funds rate, which is set by the Federal Open Market Committee consisting of twelve Fed members.
The reason interest rates, which ultimately are set by the Federal Reserve, exploded in 1980 was housings' arch nemesis, runaway inflation. The Fed funds rate, which is the rate banks charge each other for overnight loans, hit 20 percent in 1980, and 21 percent in June 1981.
Bank Lending Rate in the United States averaged 6.52 percent from 1950 until 2024, reaching an all time high of 20.50 percent in August of 1981 and a record low of 2.00 percent in February of 1950.
It's possible that rates will one day go back down to 3%, though if current trends hold that's not likely to happen anytime soon.
Does prime rate go down in a recession?
Do Interest Rates Rise or Fall in a Recession? Interest rates usually fall during a recession. Historically, the economy typically grows until interest rates are hiked to cool down price inflation and the soaring cost of living. Often, this results in a recession and a return to low interest rates to stimulate growth.
ING's interest rate predictions indicate 2024 rates starting at 4%, with subsequent cuts to 3.75% in the second quarter. Then, 3.5% in the third, and 3.25% in the final quarter of 2024. In 2025, ING predicts a further decline to 3%.
That means the mortgage rates will likely be in the 6% to 7% range for most of the year.” Mortgage Bankers Association (MBA). MBA's baseline forecast is for the 30-year fixed-rate mortgage to end 2024 at 6.1% and reach 5.5% at the end of 2025 as Treasury rates decline and the spread narrows.
The lowest auto loan rate in 2023 was 6.15 percent for a four-year used car loan in mid-January. Bankrate's expert predicts five-year new car loan rates will reach an average of 7.0 percent and four-year used car loans, 7.5 percent by the end of 2024.
Projections suggest that we may see no rate increases in 2024, and that the Fed might start dropping its rate later this year, according to the CME FedWatch Tool on March 19. If the Fed rate drops, CD rates will likely follow suit, though it's up to each bank and credit union if and when that occurs.
