The Fed cut rates for the second time in a week yesterday, reducing the funds rate by ½ point to 3 percent. The cuts are being given due to the final quarter of 2007, when the gross domestic product expanded at 0.6 percent – less than half the expected rate.

This makes five times that the funds rate has been cut since September, in response to the credit crisis. Whenever the Fed takes such an action, it makes credit “cheaper,” which it hopes will boost the economy by encouraging people to borrow more money. The problems with the nation’s economy are a result of both the two-year housing slump and a tightening in credit requirements due to billions of dollars in mortgage defaults.

Will the rate cut help mortgage rates? Some homeowners who have been waiting to refinance are confused; mortgage rates haven’t dropped during the 5 rate cuts like consumer expected. That is because the Fed controls the Discount Rate and the Fed Funds rate, and not mortgage rates directly. What the NASDAQ does will have a bigger influence on the direction of mortgage rates. Still, they are presently at their lowest level since 2005. For buyers, this could be a great time to purchase property.

In addition to the action taken by the Fed, the Bush administration has worked with Congress to create a package of about $150 billion that would offer tax rebates to households as well as business tax breaks. The package has passed in the House, but so far the Senate has not approved the move.