Mortgage rates slipped last week but few doubt their long-term trajectory is an upward one. Fannie Mae (FNMA) economists Doug Duncan and Mark Palim stopped by the Barron’soffices this week to talk about rising rates and their impact on the housing market.

They looked back at the last two periods of rising mortgage rates prior to last year: in 1994-95 when rates rose by 240 basis points over a 24-month period, and in 1999-2000 when rates rose by 180 basis points over a period of 19 months. In both cases they found that home prices continued to rise but the rate of increase slowed. At the same time the number of homes sold either fell or flattened, while the use of adjustable-rate mortgages, or ARMs, spiked.

What’s different this time, Duncan notes, is that rules for underwriting mortgages, particularly ARMs, have changed, becoming more strict in the wake of a financial crisis that was largely caused by terrible mortgage underwriting standards. Palim says the market should become less volatile as a result of these tighter rules. Duncan sees the 30-year fixed-rate mortgage rate rising to 5.0% by the end of 2013, and he expects the pace of home price increases to be just half of year’s pace, while existing home sales should rise by about 1.8%.

As the Federal Reserve winds down its Treasury- and mortgage-bond-purchasing program, Duncan says 2014 will be about private forces picking up the slack in the mortgage-bond market in the absence of Fed stimulus. “Private parties will get a better value on value,” he says, “and understanding what are these assets worth in the absence of policy support.”