Borrowers and buyers awoke to a new normal in housing affordability last week, as mortgage rates dropped to the lowest level in more than a year and are now expected to stay low for a while.

Mortgage applications jumped 8.9 percent last week from the previous week and 5.7 percent from a year earlier, according to the Mortgage Bankers Association's seasonally adjusted report.

Both refinance and purchase applications surged, but the more rate-sensitive refis were the real leader. Those applications jumped 12 percent for the week and were 8.5 percent higher than a year ago. For much of last year, the refinance market was minimal, down dramatically from 2017, as rates rose.

Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.45 percent from 4.55 percent, with points decreasing to 0.39 from 0.42 (including the origination fee) for loans with a 20 percent down payment.

That was a reaction to the Federal Reserve announcement that it does not expect to raise rates anymore this year. Some are now suggesting the central bank could even lower rates. Bond yields fell even further on concerns of slowing economic growth overseas. Mortgage rates loosely follow the yield on the 10-year Treasury note.

"Rates dropped across all loan types, and the 30-year fixed-rate mortgage is now more than 70 basis points below last November's peak," said Joel Kan, an MBA economist. "The average loan size increased once again to new highs for both purchase and refinance loans, as borrowers with — or seeking — larger loans tend to be more reactive to the drop in rates."