Mortgage rates approach the 4% barrier

NEW YORK (CNNMoney) -- Mortgage rates moved to within a hair of the 4% barrier this week, according to mortgage giant Freddie Mac.

The average rate for 30-year, fixed rate loans rose 0.07 percentage point to 3.98%, and is up 0.63 percentage point since the week of May 2. Rates have not been this high since the week of April 12, 2012.

"Fixed mortgage rates crept up further this week following a solid employment report for May," said Frank Nothaft, Freddie Mac's chief economist.

The recent improvement in the employment picture should result in more home buying, which would pressure rates even higher. Rates have also been going up because the Federal Reserve has signaled that it might cut back on buying mortgage-backed securities. If that happens, lenders would likely charge higher rates to make the securities more attractive to other buyers.

As rate increases push up the cost of home ownership, the impact on the housing market will be slight, according to Gumbinger, vice president of, a mortgage information company.

But, he added, "Although the size of the increase was , it is still unwelcome as the housing market tries to gain momentum."

The increase will boost monthly mortgage payments for homebuyers by about $33 for every $100,000 borrowed. Gumbinger said that will discourage some existing homeowners from refinancing their loans if they already have a competitive rate but " shouldn't be a major setback for a home purchase transaction."

But the soaring rates create a double whammy for would-be home buyers, with home prices also on a rapid rise -- up more than 10% in the 12 months ended March 31, according to the S&P/Case-Shiller national home price index.

If both trends continue, it could put a damper on a housing market still in a struggle to put the bust behind it.