Deflation Shows Up In Mortgages

From Bloomberg:

The Mortgage Bankers Association's purchase index fell 2.3 percent in the March 12 week. Despite the fall, two prior weeks of strong gains still hint at month-to-month strength for home sales. The refinance index also fell, down 1.7 percent. The declines weren't due to high mortgage rates which fell sharply in the week with 30-year loans down 10 basis points to an average 4.91 percent. The MBA has been warning that low rates are no longer boosting refinancing demand.


What happens when rates are forced to move up substantially when bond investors demand more yield?