January 2025 Market Rate Update
The 5-year U.S. Treasury Bond interest rate often serves as the foundation for how most commercial lenders price their loans. As of the close of business on December 27th, the average 5-year Treasury rate for December was 4.24%—its highest level since July 2024, when rates began trending upward.
What Does This Mean for 2025?
Will interest rates keep climbing in the year ahead? It’s likely—provided key economic conditions remain steady. If the stock market continues to rise, the job market holds firm, and inflation stays above 2.5%, longer-term U.S. Treasury rates (5 years and beyond) are expected to edge even higher, potentially surpassing the 5% mark.
However, if a recession takes hold and inflation subsides, short-term interest rates could see a significant drop. In fact, some signs of yield curve adjustments are already evident. Below is a year-over-year comparison of U.S. Treasury rates (as of December 27th):
- 1-Year Treasury: Dropped from 4.82% to 4.20% (-0.62%)
- 2-Year Treasury: Nearly flat, increasing slightly from 4.26% to 4.31% (+0.05%)
- 5-Year Treasury: Increased from 3.83% to 4.45% (+0.62%)
- 10-Year Treasury: Increased from 3.84% to 4.62% (+0.78%)
What Should Borrowers Do?
With this volatility, borrowers face critical decisions about how to manage their loan rates:
- Should you refinance into a new 5-year fixed-rate loan?
- Let your loan roll over to a new 1-year fixed rate?
- Pay off the loan using cash or sell the asset to avoid higher rates?
There’s no one-size-fits-all answer. The best choice depends on your borrowing needs, cash reserves, and business cash flow.
Let IAA Credit Union Help
You don’t have to navigate these decisions alone. A strong partnership with an experienced business banker can make all the difference. At IAA Credit Union, we’re here to support you with loan structures tailored to your unique situation.
As a trusted partner of COUNTRY Financial, we understand the intricacies of COUNTRY’s insurance business, how representatives are compensated, and the importance of helping you grow your agency. Let us help you make informed decisions to position your business for success.
Contact us today for details.
Read our December Market Rate Update.
*Rates from Resource Center | U.S. Department of the Treasury as of December 27, 2024.
