The Fed doesn't directly set mortgage rates, but it influences them by making changes to the federal funds rate, the interest rate that banks charge one another for short-term loans. The Fed's decisions alter the price of credit, which has a domino effect on mortgage rates and the broader housing market over the long term.

The Federal Reserve just cut interest rates, but don't get used to falling borrowing costs: they're likely to stay where they are for at least the next couple of months.