Fixed-rate home mortgages currently are averaging 10.98 percent, their highest level since October 1987, and adjustable-rate mortgages are at their highest point in more than three years, the Federal Home Loan Mortgage Corp. reports.

According to Freddie Mac's weekly national survey, last week's average for fixed-rate mortgages was up from 10.86 percent last week to the highest level since rates averaged 11.36 percent in the week ending Oct. 23, 1987.On one-year adjustable-rate mortgages, meanwhile, lenders were asking an average initial rate of 9.02 percent this week, the highest since they hit 9.09 percent on Jan. 17, 1986. The ARM rate was up from 8.93 percent last week.

The Federal Reserve Board for a year has been nudging up interest rates in an effort to restrain economic growth and thus keep inflation in check.

Housing construction hit a post-recession peak in 1986 and has been sliding since then, although most economists say the industry remains healthy as it weathers a controlled slowdown.

Analysts are forecasting a further decline in the housing market this year as the higher interest rates start to pinch and the economy begins to cool down.

Housing construction was down 11.4 percent in February, the government reported on Thursday, with analysts attributing the decline in part to an expected fallback after a warm-weather surge in January but also to the bite of rising interest rates.

"We're looking for a modest decline of housing market activity, due not only to somewhat higher mortgage rates but also due to the fact that the economy is slowing," said economist Richard Peach of the Mortgage Bankers Association.

Peach said the effects of higher interest rates on the housing market so far have been minor, but are likely to increase in future months.

Economist Michael Sumichrast, who publishes a newsletter on the housing industry, maintained the Fed's tight money policy already was hurting construction and sales.

"There has been an outcry of frustration about the Federal Reserve Board tightening up," he said. "We are going to get into a recession on housing unless the Fed eases up."

The rise in adjustable-rate mortgages is particularly troubling, since many homebuyers have relied on the lower initial rates offered with ARMs to break into the housing market, Sumichrast said.