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Spiking Mortgages Won't Derail Housing: Economist

Even with their recent rise, mortgage rates are still "incredibly low" by historical standards, so they will not halt the housing recovery, Trulia Chief Economist Jed Kolko told CNBC on Tuesday.

But the increase in rates is a "reason why we'll probably see home prices start to taper off a bit—not right away," he said in a "Squawk Box" interview before the latest S&P/Case-Shiller home price index showed a new monthly record for gains.

(Read More: Home Prices See Record Gain in April)

"The big effect [a higher mortgage] it has right away is it discourages people from refinancing," Kolko added. But on the flip side, he contended, fewer refis could force banks to ease still-tough lending standards to spur loan demand.

"A 5 percent mortgage that you can get is a lot better for the housing market than a 3.5 [percent] rate you can't get," he continued, because "buying is still more than 40 percent cheaper than renting nationally."

"People with great credit can probably get a mortgage a bit more easily than 12 months ago," he said, but for everyone else "it's still pretty tight."

The overnight average for a 30-year fixed-rate mortgage rose to 4.51 percent, according to BankRate.com—about a half a percentage point higher than a week ago.

Mortgage rates are following bond yields higher after Federal Reserve Chairman Ben Bernanke said the central bank may taper its bond buying if the economy continues to show improvement. The yield on the 10-year Treasury hit 2.667 percent Monday—its highest level since August 2011.

Even though higher mortgage costs can typically squeeze homebuyers out of the market, "rates are rising hand and hand with the economy strengthening" this time, Kolko explained, which means "people are in a better position to afford" them.

On the issue of housing finance reform, Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., plan to introduce on Tuesday a bill to wind down Freddie Mac and Fannie Mae over five years.

"It brings discipline back into the housing finance sector where you don't have private gains and public losses," Corker told "Squawk Box."

Sitting next to Corker, Warner explained: "This was the one piece of financial reform that still hasn't been completed. Now that the housing market has come back, before we allow the status quo to continue, let's go ahead and fix this."

Kolko said: "Getting the government out of guaranteeing or insuring almost all mortgages, is very important. [But] it's going to be a long-term process. It's politically messy."

By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.