T
he Federal Reserve has made a highly anticipated move, cutting interest rates by half a point in its first reduction since the pandemic. This decision brings the federal funds rate to between 4.75% and 5%. The central bank's action comes after recent economic data showed inflation nearing its 2% target and unemployment rising to 4.3%.

    Mortgage rates had already begun falling ahead of the Fed's announcement, with a 30-year-fixed mortgage dipping to 6.15%, its lowest level in two years. Purchase and refinance applications saw significant increases last week.

    While not directly tied to the Fed's interest rate, mortgage rates are influenced by the same economic conditions considered when determining federal funds rate changes. The National Housing Conference welcomed the move, citing potential benefits for affordability and inventory growth.

    However, Fed Chair Jerome Powell cautioned that the impact on the housing market is uncertain, noting that the inventory crunch is a complex issue not easily resolved by monetary policy. Despite this, some experts predict a recovery in the housing market sooner rather than later, with lower mortgage rates already priced into transactions.

    In the short term, lower mortgage rates may increase competition for available homes, but it could take months for inventory levels to recover from the effects of higher mortgage rates.