If a federal reserve action causes mortgage rates to decrease, which market change is most likely?

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Multiple Choice

If a federal reserve action causes mortgage rates to decrease, which market change is most likely?

Explanation:
When mortgage rates fall, borrowing becomes cheaper, so monthly payments for the same loan drop and more buyers can afford to purchase homes. That expands demand for housing. If supply stays relatively fixed in the short term, increased demand pushes housing prices higher. The other outcomes don’t fit the typical response: cheaper rates don’t cause prices to fall, mortgage applications would likely rise (not disappear), and while some borrowers might choose longer terms in some cases, the primary market effect of a rate drop is stronger demand and higher prices.

When mortgage rates fall, borrowing becomes cheaper, so monthly payments for the same loan drop and more buyers can afford to purchase homes. That expands demand for housing. If supply stays relatively fixed in the short term, increased demand pushes housing prices higher. The other outcomes don’t fit the typical response: cheaper rates don’t cause prices to fall, mortgage applications would likely rise (not disappear), and while some borrowers might choose longer terms in some cases, the primary market effect of a rate drop is stronger demand and higher prices.

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