Part of the market was correct in its speculation about the size of the cut, which turned out to be 50 basis points. A majority of the market was anticipating a cut of that size on Wednesday, according to First American Chief Economist Mark Fleming

However, the move surprised another significant chunk of the market anticipating a 25 basis point cut.

"The Fed's 0.50% rate cut was more than many analysts anticipated. While this large cut is because of economic weakness, the silver lining is that it could result in additional mortgage rate decreases in the short term," said Bill Banfield, chief business officer of Rocket Companies, in an email.

And while the latest quarterly Summary of Economic Projections was in line with consensus that rates would drop 100 basis points moves in total by year-end (including the move just announced), its call for another 100 basis point drop next year was more aggressive than anticipated.

"The pace of monetary loosening is expected to be faster than they had thought," Fleming said, referring to the market consensus.

A drop in mortgage rates wasn't immediately apparent right after the announcement since the near-term Fed actions were in line with expectations a lot of the housing finance market had already priced in, but long-term declines may be quicker than previously anticipated, Fleming said.

"We do expect that if mortgage rates remain near these levels, it will support a stronger than typical fall housing market and suggest that next spring could see a real rebound in activity," said Mike Fratantoni, chief economist at the Mortgage Bankers Association, in a statement.

That could lift both demand and supply in the housing market, shortages in the latter being something Fed Chairman Jerome Powell showed concern about in a press conference Wednesday. 

Powell said the Fed doesn't have direct control over this but "normalizing" the mortgage market through rate actions would be one of the best actions it could take to address it. When asked how far mortgage rates will drop, Powell said it largely depends on economic conditions going forward.

Mortgage-backed securities prices were largely stable with slight downward pressure shortly after Powell's press conference, according to Barry Habib, founder and CEO of MBS Highway.

"We are right now, down eight basis points in the mortgage-backed security market, which is up actually up two basis points from 10 o'clock this morning. There's been very little change. So it took the Fed action in stride," Habib said in an interview soon after the Fed chairman spoke.

The downward pressure on MBS prices may have resulted from Powell's statements indicating that he doesn't think the Fed is behind the curve when it comes to where its policy is relative to the economy, "because that means the pathway might be a little less aggressive," said Habib.

"If this starts a declining rate cycle, homebuyers will benefit. It could also increase inventory as current homeowners with low rates may find it easier to sell," said Susan Crotty, chief investment officer at Segal Marco Advisors.

That raises questions about the balance between the two, which will depend on the extent to which rates fall and expose outstanding borrowers to refinancing incentives.

"It's really hard to know how the supply and demand dynamic interacts," Fleming said in an interview. "Markets are rarely in equilibrium. We've never had such inventory shortages and rate lock effects. So we don't have historical precedent to study."

Projections for long-term mortgage rate declines through year-end are modest, which could limit the extent to which refinancing incentives reach outstanding mortgages, and the amount of supply they add to the market.

"It is possible that mortgage rates may be lower by the end of this year than previously forecast with the Fed taking a more aggressive loosening stance than expected," Fleming said. "I think it's highly possible we get a couple of tenths lower by the end of the year, so maybe below 6%."

An examination of historical correlations between bond market and home loan correlations suggests over time mortgage rates could even get as low as 4.5%, according to Habib.

Even the small drop in rates seen so far could be helpful to the mortgage market.

"While not enough for a full scale refi boom, an average 30-year rate approaching 6% does open up a meaningful slice of the market for refinancing," said Eric Orenstein, senior director at Fitch Ratings, in an emailed statement.

However, even a small drop could be helpful to the mortgage market, but it will help some companies more than others, Garth Graham, senior partner at industry consultancy Stratmor Group, said in an interview.

Citing research Stratmor has published, Graham noted that with a lot of smaller mortgage companies selling their production to aggregators to raise cash, many of the larger players control the related servicing rights and may have an edge in customer retention as refinancing increases.

"If you're an independent mortgage banker, and you're selling on your production to an aggregator, and also assuming that if rates go down, you're going to get back your refinances, I think that is a fallacy," he said. 

"The guys who bought the loan are going to go after it hard, and they have every advantage. They have all the data and everything else. So I think refinancing will not help everybody equally." Graham added.

There also could be a divide in who benefits from any pickup in the purchase market if recent legal developments affecting the real estate agents result in consolidation in that business. It may lead to "a corresponding drop in loan originators who don't have meaningful relationships with high producing groups," he said.

The impact on the purchase market is likely to be complicated due to the interplay in how the Fed cut affects home prices, builders and the larger economy, according to Patricia Watson, a professor in the Dr. Wallace E. Boston School of Business in the American Public University System.

"Lower Fed rates may drop mortgage rates, increasing buyers but also raising home prices due to limited supply. This could negate savings from lower rates. Additionally, lower rates might boost residential construction and refinancing activities. However, the overall impact is influenced by various economic factors, making the housing market's response complex," she said in a statement.