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UK banks fail to pass or todays interest rate cut

Today has seen the reopening of hostilities between the UK government and the UK financial sector with news that many of the U.K.'s leading banks are not prepared to pass on today's full 1% base rate cut. The move seems to fly in the face of recent comments from the UK government which indicated that an understanding had been reached but this does not seem to be the case.

Aside from the concerns regarding variable rate mortgages, a number of tracker mortgages have also come to the fore whereby their small print restrictions placing a floor on how low rates can go. One of the leading tracker mortgage companies appears to have a 3.49% floor which means that their profit margins are expanding as interest rates are falling further. This is turning into a serious issue for the UK government who are effectively using taxpayer's money to increase the profitability of the UK banking sector.

This latest twist in the saga between the government and the UK financial sector may lead to the introduction of tighter regulations and potential fines for those "mistreating" customers as was suggested by Gordon Brown in the Queen's speech.

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