New houses are seen for sale at Woodland Village, built by Lifestyle Homes housing developer, in Cold Springs, Nevada.

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.

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