Savers and home buyers are beginning to see signs of improved products from banks following the Bank of England’s decision to keep the interest rate unchanged.

Businesses can also expect to see an easing of borrowing costs as the market becomes more competitive.

However, analysts have warned that oil prices are on the rise and could push inflation back up and put pressure on the bank to keep interest rates high for some months.

The bank’s monetary policy committee today decided by a narrow 5-4 majority to retain the base rate at 5.25% after 14 successive monthly interest rate rises, with the minority wanting a quarter point rise.

The decision follows August’s surprise fall in inflation to 6.7%, now well off its peak of 11.1% last October.

NatWest, parent of Royal Bank of Scotland, has announced further cuts on selected residential fixed and tracker deals by up to 0.2% and fixed and tracker buy-to-let deals by up to 0.31%.

Virgin Money launched broker-only residential and buy-to-let fixes with sub 5% interest rates. Accord Mortgages and a few other lenders have announced that rate changes are imminent.

Nationwide Building Society announced further mortgage rate cuts. From 22 September it is reducing selected fixed rates by up to 0.31%.

Investors sold sterling, pushing the currency 0.5% lower against the dollar to $1.22, the weakest level since the collapse of a series of regional US banks in March.

The pound is sensitive to changes in interest rate policy with higher borrowing costs meaning better returns for investors who hold sterling, while doveish monetary policy pushes down a currency’s value relative to the dollar. The pound hit a high of $1.31 to the dollar in July.

Louis Coke, senior investment manager at Charles Stanley, said: “Many business owners will likely be breathing a sigh of relief today, with the peak in UK interest rates potentially in sight.

“This will likely bring some calm particularly to those who are looking to either raise expansion capital from investors, or who are looking to sell their business. In fact, more than a quarter (27%) of business owners admitted they’ve had to delay selling their business due to high interest rates.

Rob Clarry, investment strategist at wealth manager Evelyn Partners, said: “The Prime Minister’s pledge to halve inflation this year, from 10.1% in January to approximately 5% in December, looks to be on track; economists expect inflation to average 4.5% in the fourth quarter of this year.”

He noted that a key threat comes from higher oil prices and said these typically take around one-month to feed through to petrol prices.

However, he said that in the absence of further shocks, it looks like the BoE is now at, or very close to, the end of its hiking cycle.

“Attention will now turn to rate cuts, although markets are only pricing one 25 bps cut by the middle of 2024. This is consistent with our expectation that the Bank will keep policy tight through 2024 as they continue to fight inflation.”

Nicholas Hyett, Investment Manager at Wealth Club, commented: “From here there’s a strong argument for the Bank taking a prolonged pause.

“Fixed rate mortgages and a higher proportion of mortgage free owner occupiers mean higher rates don’t feed through to the economy as quickly as they once did, and the full impact of past interest rate hikes hasn’t been felt yet.”