Ready to buy a home? Lock in your mortgage rate now

Buying into the American dream of homeownership is getting pricier. A confluence of factors has made for a seller's market across much of the country, with buyers already sidelined by limited supply and lofty prices. But this week they're confronting another hike in borrowing costs.

"Rising mortgage rates are further squeezing affordability for would-be homebuyers that are already frustrated by limited inventory of available homes and the higher home prices that have resulted," Greg McBride, chief financial analyst at Bankrate.com, said in emailed comments.

The ability to afford a home is becoming a bigger hurdle as increases in property values outrun growth in income and as interest rates climb.

The benchmark used in setting rates for loans including home mortgages is the 10-year Treasury note, and on Wednesday it held near seven-year highs, just a tick below 3.1 percent. That's hiking borrowing costs for consumers, businesses and the government.

For those looking to purchase a home, this week's rate increase would tack on about $20 a month to your mortgage payment, which is "not going to make or break anyone" already positioned to make the purchase, Aaron Terrazas, Zillow's senior economist, told CBS MoneyWatch.

The traditional 30-year, fixed-rate home loan currently stands at 4.55 percent, up from 4.05 percent a year ago. 

While most Americans buying homes sign up for a 30-year loan, they typically decide to move within seven to 10 years, "making the 10-year Treasury the best and most liquid benchmark for that mortgage rate," Terrazas explained. 

Borrowing costs, which held at about 7 percent from 1985 to 1999, a stable period in the U.S. housing market, are on their way higher, so it's a good time to nail down a loan, said Terrazas.

The increase in borrowing costs is not unexpected, considering that the Federal Reserve is raising its lending rate and selling off its investments in mortgage-backed bonds, he noted.

"We know inventory is tight, but if there's a chance of finding your dream home in the next 30 days," it would make sense to lock in a mortgage rate, said Terrazas. "Given the trend in the past six months has been upward, and moves by the Fed are going to push up short-term interest rates." 

A larger hurdle for homebuyers is the short supply and higher prices, the Zillow economist added.

"Nationally, single-family housing completions dropped 4 percent in April, putting the supply of single-family homes for sale near all-time lows, pressuring housing prices." Kathleen Navin and Patrick Newport of IHS Markit said in an analysis of government construction data.

Figures from the Mortgage Bankers Association illustrate the rising borrowing costs and strong demand for mortgages. Fewer consumers are refinancing their home loans compared to a year ago, when interest rates were lower, while applications to buy a home are 10 percent higher, according to the MBA data.