"Rates as a whole are creeping up in anticipation of the Fed's move next week," said Vern Omori, senior vice president of First Hawaiian Bank's residential real estate division. "I think (the trend of declining interest rates) is over. You can expect rates to go up gradually over the next year."

The Federal Reserve meets on Tuesday and Wednesday and is widely expected to raise its benchmark overnight rate by at least 0.25 percentage points, which would be its first increase since May 2000.

Rising inflation and a fiscal deficit that needs to be financed by borrowing are two factors leading to higher interest rates, said Leroy Laney, an economics and finance professor at Hawaii Pacific University.

The higher mortgage rates are unlikely to put an end to Hawai'i's rapidly rising housing prices unless the rates go higher than 7 percent, said Rusty Rasmussen, a vice president with Castle & Cooke Mortgage, the in-house lending arm of Castle & Cooke Homes Hawaii.

To be sure, low mortgage rates have been a major catalyst for the state's booming housing market. Since May 2000, the median home price in O'ahu has climbed 53 percent to $445,000. Much of that appreciation can be traced to the drop in mortgage rates, which made homes affordable to a larger number of residents.

On the national level mortgage rates held steady or moved lower this week. The 1-year adjustable rate mortgage was unchanged at 4.13 percent for the week, according to Freddie Mac. The 30-year and 15-year rates dropped slightly to 6.25 percent and 5.64 percent, respectively.

The nationwide averages for mortgage rates are lower than the Hawai'i rates because they do not include add-on fees known as points. Thirty-year and 15-year loans each carried an average fee of 0.6 point this week, while one-year adjustable rate mortgages carried an average fee of 0.7 point. One point on a $100,000 loan would be $1,000.

The Hawai'i rates are based on a $200,000 owner-occupant mortgage with a 20 percent down payment.

In response to rising rates consumers are gravitating toward adjustable rate mortgages, with their lower introductory rates, First Hawaiian's Omori said. The 5-year adjustable rate mortgage is a popular choice. With this type of mortgage, borrowers enjoy a fixed rate for five years after which the rate adjusts annually.

Adjustable rate mortgage loans have risen to 50 percent of loan volume, up from 30 percent last year, Omori said.

Bank of Hawaii, the state's largest mortgage lender, has seen a "pretty good shift" to adjustables from fixed as rates crept up, said John Gray, its executive vice president and mortgage banking general manager.

Last year, 10 percent of the bank's residential loans were adjustables, he said. It's now at 40 percent, mainly to 5-year adjustable rate mortgages.

There's also a pickup in interest-only loans, Gray said. These loans typically offer lower rates than fixed mortgages.

While Gray agrees that mortgage rates are headed higher, he believes increases would be gradual or rates could stay steady after a while.

"There still seems to be a lot of mixed messages out there in terms of the economy," he said.

Even with the recent increases, rates still hover near their lowest levels in half a century, said Harvey Shapiro, chief economist of the Board of Realtors.

Last year, it took a third of Hawai'i's median household income to purchase a home priced at the median, Shapiro said. In 1990, when interest rates were averaging around 10 percent for 30-year fixed rate mortgages, it took 60 percent of median income to buy a median-priced house.