The Federal Reserve announced Jan. 31 it would keep its benchmark lending rates in a range between 5.25% and 5.5%.

"The committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%," said a Fed statement.

A rate hike pause is still good news for consumers and businesses, who have been facing elevated borrowing costs on everything from personal loans to credit cards to mortgages.

The Fed doesn't directly set rates for lending products, including mortgages, but rates tend to follow the baseline over time. For example, mortgage rates have more than doubled since March 2022. Borrowers can expect similar results from a rate hike pause. The Fed's benchmark rate will remain steady and mortgage rates are likely to do the same.

After a year marked by record-high interest rates and soaring home prices, the housing market is showing signs of improvement as we begin 2024. Mortgage rates have stabilized, reaching a six-month low in December after hitting a a 23-year high in October.

Lower mortgage rates are a significant boon for buyers, lowering monthly payments, providing some budget flexibility, and reducing overall costs.

Lower rates encourage more individuals and families to take the plunge into homeownership, creating a positive cascading effect for the real estate market.

Lower interest rates also help homebuilders, who must borrow money to increase their production. Homebuyers should see a greater selection of new homes as a result.

Even before the Fed decision, mortgage lending activity was taking off in the first week of December, surging to its highest level in 9 months. The Mortgage Bankers Association (MBA) said purchasing activity increased by 3.5% and refinancing activity grew by 19.4%. The refinance share of mortgage activity rose to 39.2%.

Lower mortgage rates might also lead to higher demand and increasing property values, which could offset some of the benefits. The American Dream is synonymous with homeownership, and there is substantial pent-up demand. But overall, lower mortgage rates typically contribute to a dynamic and active real estate landscape that benefits both sellers and buyers.

Despite the challenges many potential buyers face, the enduring aspiration to own a home remains steadfast. Housing made up about 16.2% of the economy in 2022, down from 16.7% in 2021. By encouraging more people to buy homes, improved mortgage rates are often a catalyst for greater economic growth.