Rising mortgage rates are raining on the housing industry's recovery and disrupting the plans of individual home buyers and sellers. Mortgage costs have climbed sharply in recent months with the contract rate on government-insured loans jumping from 11.5 percent in May to 13.5 percent Aug. 1. And many forecasters expect mortgage costs to climb some more before the end of the summer.
''Fixed-rate loans will be at 14 percent very shortly,'' says James Christian , chief economist of the US League of Savings Associations.
Forecasters are divided over whether rates will ease in the fall, depending on what monetary policy actions they expect the Federal Reserve system to take. In testimony before Congress this week, Fed chairman Paul A. Volcker called interest rates ''extraordinarily high'' and reiterated his position that they should fall.
Concern among builders is widespread. In May, 10 percent of the contractors surveyed by the National Association of Home Builders expected poor business in the next six months. By July, 25 percent were pessimistic.
As a result, building plans have been trimmed. For example, Forest City Enterprises recently has ''pulled back on 400 lots we were going to develop'' for homes, says Sam H. Miller, vice-chairman of the Cleveland-based company. ''That is a direct result of mortgage rates.''
In Virginia, Ryan Homes Inc. posted strong sales this June. July sales figures are not available, but higher mortgage rates ''will have some effect on buyers,'' says Christopher Zell, regional marketing-services manager.
In June the number of homes started fell 2.9 percent to reach a 1.74 million annual rate, still 92 percent higher than the June 1982 level. As recently as 1978, 2.02 million homes were started. But by the end of 1984, starts will be dragging along at a 1.4 million pace, according to William Young, research economist at the National Association of Home Builders.
The upturn in rates is also dampening prospects for homeowners who want to sell their current residences and move to larger houses. In June the recovery in resales ground to a virtual halt as existing homes sold at a 2.9 million annual rate.
While homeowners sell 3.5 million homes a year in a typical economic recovery , for the rest of 1983 resales will probably run at a 2.7 million rate, according to Kenneth Kerin, vice-president for economics and research at the National Association of Realtors. In 1984 he expects resales to total 2.8 million.
''If rates are below 12 percent, you have a nice, healthy housing recovery,'' Mr. Kerin says. ''If they get above 14 percent, things come slamming down.''
Of course, some limited sectors of the housing market are relatively immune to mortgage-rate vagaries. For example, Forest City Enterprises is proceeding with development of lots for high-priced homes. ''The man who is going to buy a house for $300,000 to $400,000 either pays cash or doesn't care about rates, because he takes it off his taxes,'' vice-chairman Miller says.
But Mr. Kerin, the National Association of Realtors economist, says such a narrow segment ''is not enough to make a market.''
What would make a market is a return to more affordable interest rates. When rates are in the 12 to 18 percent range, the National Association of Home Builders estimates that each 1 percent rise in rates disqualifies 1.2 million families.
The outlook for mortgage rates hinges on the outcome of monetary policy and congressional action to reduce budget deficits that tend to push up interest rates, economists say.
Several forecasters see little short-term relief on mortgage rates. ''We will have rates around 14 percent or better for the remainder of the year,'' Mr. Kerin says. ''I think rates are going to stay pretty much where they are,'' says Mr. Christian of the League of Savings Associations.
Given the large size of projected federal budget deficits, Mr. Kerin expects the Fed to keep its hands ''firmly on the reins'' of the economy. Mr. Christian does not think the Fed will slow the economy sharply enough to ease the tug of war between private credit needs and government borrowing demands. That battle tends to push up interest rates.
But Warren Matthews, Mortgage Bankers Assocation senior economist, expects rates to dip slightly to the 12.5 to 13.5 percent level by year's end, assuming the Fed can keep inflation under control and convince financial markets this control will not slip away.
And Glynnis Trainer, assistant vice-president at Citibank, figures mortgage rates could get as low as 12.75 percent by year's end if the Fed is able to achieve its revised targets for money growth. ''We see slower money growth numbers coming in and some calming in the financial markets in the early fall,'' she says.
At least theoretically, over the longer term, mortgage rates could drop back into the single-digit level if inflation can be kept under control, Mr. Matthews says. ''Then long-term rates should come down to 8 or 9 percent, based on historical patterns,'' he says. But he cautions that ''it will probably take several years for the market to believe'' inflation has been vanquished.