Most banks are decreasing its residential mortgage rates by one tenth of a percentage point, effective Tuesday morning, a day after a report from the Canadian Real Estate Association showed that housing sales dropped nationwide considerably last month.

The move brings the five-year closed rate down to 5.49 per cent.

“Pretty much across the board, fixed current rates are coming down by about a tenth of a percentage point,” said BNN’s Michael Kane.

“The Royal Bank of Canada, which is the largest, kicked things off yesterday with the announcement and it was followed by CIBC, Scotia, pretty much everyone except National Bank and TD. But generally speaking they will probably make their announcements today.”

The move doesn’t affect the one-year closed rate for mortgages, which is holding steady at 3.30 per cent at most institutions.

Kane said the reduction of mortgage rates is linked to the shifting bond market.

“The bond market is where banks finance their mortgages and so with bond prices going up and bond yields or the interest rates they pay coming down, that creates easing conditions so the charter banks can give you a bit of a break,” he told CTV’s Canada AM.

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Tags: bond market, mortgage rates