Consumers saw an opportunity last week and took it — in a big way.

Mortgage rates dropped to their lowest level in nearly two years, so total mortgage applications surged 26.8% in just one week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 41% higher than a year ago.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.12% from 4.23%, with points remaining unchanged at 0.33 (including the origination fee) for loans with a 20% down payment. That rate was 4.83% a year ago, 71 basis points higher.       MORE