Million Dollar Listing star Josh Flagg explains how interest rate cut will impact homebuyers... as he warns sellers of HUGE trap: 'That is not going to work'

Million Dollar Listing star Josh Flagg has revealed the Federal Reserve's decision to slash interest rates is 'fantastic' news for homebuyers.

Flagg, 39, spoke in the wake of the news Wednesday that interest rates were being cut by 50 basis points - the largest amount in 16 years.

'Now it's cheaper to borrow money and what does that translate to, it means people can now afford to buy houses with mortgage rates lower,' he told CNN.

But he warned sellers not to fall into the trap of hiking their prices, highlighting that lower mortgage rates would not translate into an ability to splash out more on property.

'The only thing that would not make this a good thing is if sellers go, "Oh, well great mortgage rates are cheaper, I can just raise the price on my home" - that's not going to work and that's what people are immediately going to think,' Flagg added.

'Or they are going to think, "Prices have been fair this whole time and it was just that people couldn't afford it, but now they can so let's just keep it at the price".

'People just need to come down a little bit and not be as selfish - I'm talking about sellers, and then the buyers will come.' 

He added that he expects the reduction to spur more homeowners into putting their homes on the market due to increased confidence they will be able to sell or afford a remortgage.

'Only good things can happen,' the TV Star added. 

Today's cut brings benchmark borrowing costs down to between 4.75 percent and 5 percent. 

Fed Chair Jerome Powell said as the central bank normalizes interest rates, we should see the housing market normalize. 

The Fed’s benchmark rate doesn’t directly set or correspond to mortgage rates. But it does have a major indirect influence, and the two 'tend to move in the same direction,' said Senior Economist at LendingTree, Jacob Channel. 

However, Channel cautioned against acting impulsively to capitalize on lower interest rates.

'You shouldn’t feel obligated to completely change up your financial strategy just because rates move lower,' he said.

'Act cautiously and responsibly and don’t make any rash decisions based on a single Fed meeting or economic report.'

Channel said that the majority of Americans have mortgages at 5 percent, so rates may have to fall further than their current average of 6.46 percent before many people consider refinancing.

The 'Oracle of Wall Street' Meredith Whitney told DailyMail.com earlier this year that rates need to drop below six percent to kickstart the frozen housing market.

Brett House, the professor of professional practice in the economics division at Columbia Business School, said a higher than expected cut to the benchmark rate could indicate the Fed is concerned about the economy.

'It seems that Fed officials are more worried about growth and employment than they're saying,' House told Brick Underground.