Shares in local homebuilders and lenders jumped Wednesday morning after mortgage application volume rose 8.3 percent because of a surge in refinance activity thanks to dropping interest rates.

According to a survey for the week ending Jan. 18 by the Mortgage Bankers Association, mortgage refinances jumped 17 percent, while purchase volume fell 4.6 percent. Refinance volume accounted for 66 percent of all applications, the trade group’s survey said.

Shares in Los Angeles-based homebuilder KB Home shot up more than 10 percent to $22.19 in early trading while fellow homebuilder, Calabasas-based Ryland Group Corp., added 4.9 percent to $28.28. Shares in KB and Ryland have surged 26 percent and 11 percent so far this week, respectively.

Shares in embattled lender Countrywide Financial Corp. also saw a second-straight day of gains, adding 4.8 percent Wednesday to $5.59 so far this week shares have added 24 percent. Santa Monica-based FirstFed Financial Corp. also continued a nice run, adding another 5.9 percent Wednesday to $34.83. That stock is also up 24 percent for the week.

The average interest rate for traditional, 30-year fixed-rate mortgages fell to 5.49 percent from 5.62 percent, while rates for a one-year adjustable-rate mortgage declined to 5.51 percent from 5.77 percent.