After a rapid ascension last week, rates have cooled off some. The 30-year fixed rate mortgage is now back in 6’s territory after dropping 43 basis points to 6.65%. Meanwhile the 15-year mortgage dropped 28 basis points to 6.05%.
The UK reversed its decision to cut taxes in the highest bracket, causing U.S. bonds to rally and mortgage rates to enjoy a small recovery. Also helpful to rates was a small monthly decline in manufacturing activity. The ISM showed a decline from 52.8 in August to 50.9 in September. Any reading below 50 indicates contraction, which we are on the verge of. It also revealed weaker employment and pricing. Why is this good news? At this point, any reports of contracting economic activity and or a sustained drop in inflation is good news to the general market, because it means the Fed may have to think twice before further tightening monetary policy. In housing news, residential construction spending is slowing down month-over-month, but continues to beat out last year’s numbers. While spending declined 0.7% between July and August, it remains 12.5% higher than in August 2021, largely thanks to a 37.2% spike in home improvement.