The Mortgage Bankers Association (MBA) reported on Wednesday the mortgage application volume in the U.S. surged 5.3 percent in the week ended August 2, following a 1.4 percent drop in the previous week.

According to the report, refinance applications climbed 12 percent, while applications to purchase a home fell 2 percent.

Meanwhile, the average fixed 30-year mortgage rate decreased to 4.01 percent from 4.08 percent.

“The Federal Reserve cut rates as expected last week, but the bigger influence on the financial markets was the development that a trade war with China has started. The result was a sharp drop in mortgage rates, which will likely draw many refinance borrowers into the market in the coming weeks,” noted Mike Fratantoni, MBA senior vice president and chief economist. “The 30-year fixed rate mortgage fell to its lowest level since November 2016. We fully expect that refinance volume will jump even higher this week given the further drop in rates.”