One day after a report showed Canadian housing sales were down 30 per cent, most major banks announced they were cutting mortgage rates.

Most banks trimmed mortgage rated by one tenth of a percentage point, effective Tuesday morning.

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.

Housing sales fall in Canada

Meanwhile a report on Monday from the Canadian Real Estate Association showed housing sales dropped by 30 per cent nationwide last month, largely due to a new tax in British Columbia and Ontario that experts say deterred home buyers in two of the country's hottest housing markets.

The association reported a 6.8 per cent drop in home sales through its MLS service, compared with June numbers. The decline is part of a gradual dampening of Canada's once-booming real estate market.

B.C. and Ontario accounted for roughly 85 per cent of the slump, as the implementation of the harmonized sales tax this summer pushed many home buyers to purchase earlier this year, the association said in a statement.

The two provinces typically represent more than half of the country's sales.