If housing is the reason the economy is slowing (along with fewer durable goods orders for airplanes) then there are certainly more Federal Reserve target (consumer-impacting) short-term interest rate cuts.

"Did you enjoy the Fed rate cut?" jokes mortgage banker and author, David Reed . "Bernanke appears to be operating a bit differently than his old pal Greenspan. Greenspan took a measured approach to rate moves, a 1/4 point here, 1/4 point there. But not Bernanke. At least not this time."

Reed explains why the 50-basis point cut was so dramatic. "Credit markets are still in a bit of peril so it's logical to assume Bernanke had to show the world that he's ready to do whatever it takes -- immediately -- to calm the financial fears," reasons Reed.

But the cuts last week didn't work.

While a few people ran to refinance their mortgages, weekly mortgage loan applications actually went down in volume to a seasonally adjusted 2.8 percent. The drop in applications to purchase homes actually dropped 7.3 percent, says the Mortgage Bankers Association. Applications to refinance were up 3.3 percent.

Why? Interest rates on fixed-rate home loans increased, not decreased the way consumers were hoping. Presumably the ones that locked were sitting on "ready" as the Fed announced its rate cuts. Rates went down for about 48 hours, giving many a window, but then they were quickly back up to around 6.5 percent. The average interest rate on a 30-year conventional fixed rate (6.38 percent) was higher for the week than the previous week (6.29 percent)!

Now how can that be? Aren't there millions of adjustable rate interest holders who are just dying to refinance? If so, they didn't like the rates. There were fewer ARM holders applying to refinance (12.2 percent) than the previous week (12.6 percent).

So why did interest rates increase instead of decreasing? "Those who invest in mortgage-backed securities 'sobered up' from the 1/2 point rate cut by the Fed and started viewing the move a little differently. Such a swift rate cut could in fact be inflationary, something bond traders hate. So they're looking further down the road and coming to the conclusion that the risk of inflation is too great to buy too many mortgage bonds," explains Reed.

That's why news like the fade in durable goods orders is music to the ears of mortgage seekers. Slowing orders means a slowing economy and less likelihood of inflation. Never mind that it also means eventual job loss. That's why interest rates fell slightly on the "good" news from the Commerce Department that durable goods orders dropped 4. 9 percent in August after a 6.1 percent gain in July. Of course, money was a little harder to come by in August thanks to the subprime meltdown and subsequent credit tightening that the National Association of Realtors blamed for slowing sales and inventories rising to 10-month levels.

Interest rates may have to be cut several more times before mortgage interest rates respond to the lack of inflationary threat with lower bond yields on treasuries. Until then, it's a tricky prospect for the Fed, says Reed.

"Rates could still continue to move downward over the longer term, say into next spring, but if they do, it will be a gradual move," he predicts. "And the economy will have to appear to be slowing while keeping inflation at bay."