U.S. home builder confidence rose in October for the second consecutive month but volatile mortgage rates and low housing affordability continued to pose headwinds.

The NAHB/Wells Fargo Housing Market Index of builder confidence increased to 43 this month from 41 in September, the National Association of Home Builders said Thursday. A Reuters poll showed economists expected the outlook to rise to 42 this month.

The Federal Reserve drove up interest rates between 2022 and 2023 to the 5.25%-5.50% range to quash high inflation, causing a slowdown in the housing market. However, mortgage rates had been falling ahead of a rate-cutting cycle, which began last month with a larger-than-usual half percentage point cut.

Investor expectations for the pace and extent of rate cuts by the U.S. central bank have since been dialed back by stronger-than-expected readings on employment, consumer spending and inflation, causing mortgage rates to reignite.

The average 30-year fixed rate mortgage jumped to 6.32% last week, the biggest weekly gain since April, Freddie Mac data showed. The rate had declined to near 6% in late September from a high of almost 8% last October.

"We are forecasting uneven declines for mortgage interest rates in the coming quarters which will improve housing demand but place stress on building lot supplies due to tight lending conditions for development and construction loans," NAHB Chief Economist Robert Dietz said in a statement.

Data earlier this month showed that U.S. construction spending unexpectedly declined in August amid a sharp drop in outlays on single-family housing projects.

Sentiment on sales expectations in the next six months rose four points to 57 in October from the prior month, the NAHB survey showed. The share of builders cutting prices was unchanged this month at 32%, while the average price concession returned to its long-term trend of 6% after falling to 5% in September. The gauge of prospective buyers rose two points to 29.