Mortgage rates have dropped to a three-year low, prompting some homeowners to consider refinancing. CBS News' Megan Cerullo reports.

Mortgage rates have reached a three-year low, leading to increased interest from both prospective homebuyers and those considering refinancing. The drop follows recent federal initiatives aimed at improving housing affordability, including a government purchase of $200 billion in mortgage bonds.

Experts note that with rates now around 6%, down from 7% the previous year, refinancing could be beneficial for some homeowners, especially if the rate drop exceeds one percentage point. However, they caution that refinancing involves upfront costs, and homeowners should calculate their break-even point and consult with experts before proceeding.

Should you refinance as mortgage rates drop?

All right, we told you Friday about how mortgage rates have fallen to a three-year low. But what does that really mean for those of you out there looking to buy a home or maybe thinking about refinancing? CBS News Money Watch reporter Megan Cerullo is here with me to discuss that and more. Good morning, Megan. Great to have you here. Happy Monday. Happy Monday. Buying a home is so far out of reach for so many people. Help us understand why that is and what this rate drop might mean for those folks. It's a supply and demand issue. And the problem is that there are not enough available homes for sale. President Trump has recently tried to tackle the housing affordability issue, announcing two proposals, one of which is he directed the federal government to buy $200 billion worth of mortgage bonds. And we have already seen mortgage rates come down, which has sparked more interest among aspiring homebuyers in entering the market. And we've also seen an uptick in refinancing activity. Well, let's talk more about that because I remember during the pandemic, mortgage rates really came down and so many people either purchased a home or refinanced that they don't want to move on until the rates get any better. Now that rates have dropped somewhat, might it be a wise decision for some to explore refinancing? It could be. Rates are at around 6%. This time last year, they were at around 7%. And experts do sometimes point to that one percentage point drop as a rule of thumb as a threshold for when it could make sense to refinance. There are a few things to take into consideration, though. For example, refinancing does have upfront costs and fees associated with it. So you're going to have to do a little bit of math and make sure that you're going to get to that great break even point within a reasonable amount of time. If your goal is to lower your monthly interest payments, then refinancing could make sense. If you're worried that, well, hey, our mortgage rate is going to drop even further, that doesn't necessarily mean you should wait. No one has a crystal ball. And you can also refinance again further down the line. That's true. So crunch the numbers, speak with an expert if you can, and add it all up to see if it makes sense. Megan, thank you very much. Thanks, Errol.

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