WASHINGTON (Reuters) - U.S. single-family home construction rose steadily in December, but further growth was limited by rising mortgage rates and an oversupply of new homes on the market.

The U.S. Department of Commerce's Census Bureau said Friday that single-family housing starts, which account for the majority of residential construction, rose 3.3% last month to a seasonally adjusted annual rate of 1.05 million units. November's data was revised upward to show construction rose to 1.016 million units from the previously reported 1.011 million units.

Higher mortgage rates are putting pressure on the homebuilding industry, which has been benefiting from a scarcity of resale homes. Mortgage rates have risen in tandem with U.S. Treasury yields, which have soared on the back of economic resilience and as investors fret about President-elect Donald Trump's proposed policies, including tax cuts, higher tariffs on imported goods and mass deportations. May increase inflation.

The Fed has cut its forecast for rate cuts this year to just two from the four expected when it launched its policy easing cycle in September. The Federal Reserve has lowered its benchmark overnight interest rate by 100 basis points to a range of 4.25%-4.50%. The policy interest rate will be raised by 5.25 percentage points in 2022 and 2023.

The average interest rate on a 30-year fixed-rate mortgage rose above 7% this week for the first time since May, mortgage financier Freddie Mac said Thursday.

Homebuilders cheered Trump's victory in the Nov. 5 election as they hoped for a looser regulatory environment. However, economists warn that if the new administration continues its immigration and trade policies, building material prices will rise and there will be a shortage of workers on construction sites.

The National Association of Home Builders/Wells Fargo Housing Market Index was unchanged in January after rising in the previous two months, with builders complaining of high borrowing and construction costs.

There is a glut of unsold new homes, with inventory levels last reaching levels last seen in late 2007.

Future construction permits for single-family homes increased 1.6% in December to 992,000 units.

"The rising levels of unsold new home inventory on builders' books suggests that any eventual pickup in demand will only be as mortgage rates eventually fall," said Samuel Toombs, chief U.S. economist at Pantheon Macroeconomics. weakly affect construction activity.”

(Reporting by Lucia Mutikani; Editing by Tomotsu Noyama)