Canadian banks have begun to lower fixed mortgage rates to their lowest levels since last spring.

RBC Royal Bank announced Thursday that it would chop most of its mortgage rates by a fifth of a percentage point, effective Friday. TD Canada Trust, BMO Bank of Montreal, Scotiabank and CIBC followed later with similar cuts.

The posted rate for a five-year closed mortgage drops to 6.99 per cent. That's the first time the posted rate for the popular five-year term has been below seven per cent since last May.

The posted rates for a one-year closed mortgage falls to 6.95 per cent at some banks and 6.90 per cent at others.

Banks will generally chop at least one percentage point off their posted rates — especially for their longer-term fixed mortgages.  

Other mortgage lenders, such as virtual banks and some credit unions, promise to beat the best rates offered by the major banks. 

The Bank of Canada has cut its key overnight lending rate by a full percentage point since early December as it tries to keep the Canadian economy from following the U.S. into recession.

That's led to a similar one percentage point drop in variable rate mortgages and other floating rate loans tied to the banks' prime rate.

But fixed mortgage rates have been much slower to drop. Since the start of December, the posted five-year fixed mortgage rate has fallen by two-fifths of a percentage point, counting Thursday's rate drop.   

Longer-term mortgage rates reflect the cost that banks pay to borrow money in the capital markets. Analysts say the global credit crunch — triggered by the U.S. subprime mortgage crisis — has made it more expensive for Canadian banks to access funds.

A further cut in the Bank of Canada's key lending rate is expected when the central bank makes its next scheduled announcement on April 22, so borrowers can look forward to a corresponding drop in their variable rate mortgages then.