Realtors and some banks will tell you that the Fed rate has nothing to do with mortgage interest rates directly. Since the Fed rate is the amount charged for loans between banking institutions, if it is lower, they have the option of offering that new money at lower interest rates. Thus, the Fed's rate may only indirectly affect mortgage interest rates. Historically, though, drops in the Fed rate have had a trickle down effect through increased competition between lenders for new customers.