It appears to have taken a few weeks for current homeowners to realize mortgage rates had dropped dramatically. And when they did, they acted.

Applications to refinance a home loan surged 35% last week, compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. They were up a whopping 118% when compared with the same week one year ago.

This, even though the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) fell very slightly, to 6.54% from 6.55%, with points decreasing to 0.57 from 0.58 (including the origination fee) for loans with a 20% down payment.

While rates dropped just 1 basis point last week, they were down 33 basis points in the past four weeks. They were also 62 basis points lower than the same week a year ago.

“The refinance index also saw its strongest week since May 2022, driven by gains in conventional, FHA, and VA applications,” said Joel Kan, an MBA economist, in a release.

Applications for a mortgage to purchase a home rose just 3% for the week and were still 8% lower than the same week one year ago. Today’s homebuyers are dealing with a lot more than high interest rates. They are still up against high home prices and low supply. There is also a feeling among some buyers, according to agents, that mortgage rates may fall even lower, so they are waiting before making such a large purchase.

The refinance share of mortgage activity increased to 48.6% of total applications from 41.7% in the previous week. One year ago, refinance volume was just 29% of total applications.

Mortgage rates started this week essentially flat, but that could change with the release of the government’s monthly inflation report, the consumer price index.

“There’s no way to know ahead of time whether the data will be friendly or damaging–only that CPI is responsible for some of the biggest spikes and drops over the past few years,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.