uSwitch.com's tracker mortgage tracker

Just two weeks after the unprecedented base rate decrease of 1.5% and the ensuing tracker mortgage market exodus, 16 key providers have now re-launched these products at an average rate of 5.24% APR, according to uSwitch.com.

Although these rates have dropped, this is still 2.24% above the current base rate of 3% and 1.15% above the current three month Libor rate (London interbank offered rate) at 4.09%. Last month, the average two year tracker rate was 6.27% APR so it does seem promising that the gap is decreasing. The new rates start from a competitive 3.99% APR with HSBC up to 7.36% APR with other providers.

Across all of the new tracker mortgages, fees and charges vary significantly. Some providers offer a booking fee for as little as £99 when others are really cashing in with fees as high as almost £4,000. For example, consumers taking out a £150,000 mortgage with Cheltenham and Gloucester at 4.39% APR for 26 months will also have to pay a 2.5% arrangement fee and a £99 booking fee. This is a total cost of £3,849 on top of the mortgage or £148 per month. The actual equivalent APR on this mortgage is 6.07% and the monthly payments equate to £972 per month not the advertised £824.

The Libor rate continues to be a key influencer on mortgage rates. Providers have been struggling with it for some time now as it has been so much higher than the base rate. In the last six weeks this rate has dropped by more than 2% and now sits at just over 1% higher than the base rate. But this is nothing new for banks as these two rates have not been exactly the same since June 2005.

Libor rate key facts:

Over the last six weeks, this rate peaked on 1 October 2008 at 6.31%, the highest it has been since December 2007 at 6.39%, 0.89% above the base rate

In the last 20 years the Libor reached a peak in October 1989 at 15.63% against a base rate of 15%

In the last 20 years, the biggest gap between the base rate and the Libor was 2.69% in September 1992 when the Libor 10.69% and the base rate was 8%

Louise Bond, personal finance manager at uSwitch.com, comments: "New tracker mortgage customers can expect to save over £1,000 a year on the average tracker rate which is welcome news in this climate. Going forward, we expect to see further base rate cuts so these savings should get bigger. For people who are brave enough to enter the housing market in this climate, tracker rates should be considered as these rates are only going to go down over the coming months. But of course, as with all variable financial products, nothing is guaranteed.

"However, some providers have already pre-empted further base rate cuts by putting clauses into tracker contracts which will not allow the rate to fall below a certain threshold. This will be particularly interesting going forward as Halifax Bank of Scotland (HBOS) will not cut tracker rates below 3% and Nationwide Building Society also refuses to pass on any decreases if the base rate sinks lower than 2.75%.

"The mortgage market is certainly tough at the moment for both lenders and borrowers but at last it seems to be moving in the right direction although borrowers will need to keep their wits about them."