Bank of England holds base rate at 3.75%

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What today’s rate hold means for homeowners thinking about equity release

The Bank of England has decided to hold the base interest rate at 3.75% today. This follows a year and a half of six gradual cuts aimed at controlling inflation, which remains above the Bank’s 2% target.

Here’s a reminder of what has happened to base interest rates over the past couple of years:

What today’s rate hold means for equity release

For homeowners thinking about equity release, today’s decision is worth noting. While equity release rates don’t track the base rate directly, they can be influenced by it. However, wider economic and commercial factors are also important. 

In particular, lenders look at government bond prices and the returns they generate, known as gilt yields, when setting interest rates on equity release lending. Gilt yields have a bigger impact on the rates offered than the base rate alone.

Over the past year, UK government gilt yields have moved around but remain relatively high, despite base rate cuts. That’s one reason why equity release interest rates haven’t fallen significantly recently. 

Other factors that can affect the rate you are offered include:

• Age: Older homeowners often receive more favourable rates.
• Property value and type: The market value of your home and whether it is freehold or leasehold can affect the deal.
• Location: Regional variations in property prices and lending risk influence rates.
• Health and lifestyle: Some providers consider personal health or lifestyle factors when pricing.

Understanding these factors helps explain why rates can vary between equity release lenders and what might work best for your circumstances.

Will interest rates fall soon?

Industry and economic commentators largely expected the Bank of England’s decision to keep the base rate at 3.75%, with some noting it reflects a cautious approach as inflation remains above target. The latest figures show inflation running at 3.4% for the year to December 2025.

The Bank’s governor Andrew Bailey said inflation is likely to ease back very soon, but the Bank wants to be sure it stays on track before cutting rates: “We now think that inflation will fall back to around 2% by the spring. That’s good news. We need to make sure that inflation stays there, so we’ve held interest rates unchanged at 3.75% today. All going well, there should be scope for some further reduction in the bank rate this year.”

Property and financial professionals speaking to The Negotiator describe the hold as giving markets and consumers more stability in the housing market. They emphasise that while further cuts could come later in 2026, the timing remains data-dependent, with policymakers keen to avoid cutting too quickly and risking a rebound in inflation. 

Paresh Raja, CEO of Market Financial Solution said: “Given the historic lows we saw between 2008 and 2022, it’s understandable that there remain loud calls for the base rate to fall further and further. But a mindset shift is perhaps required – the Bank of England is not going to rush to cut the base rate, and when we zoom out and look at the last three or four decades, we see that the cost of borrowing today is highly competitive.”

Planning equity release in 2026?

Equity release can provide cash for home improvements, retirement spending, or family support, but it’s important to plan carefully. 

For those who want a lump sum now but are mindful that rates could change in the future, a drawdown lifetime mortgage could be a flexible solution. This lets you access cash at today’s equity release interest rate, and then make further withdrawals in the future, potentially benefitting from lower rates.

Speaking with one of our selected equity release advisers can help you understand your options. They can also compare equity release plans from the UK’s leading providers.

Get in touch today for a free, personalised quotation. Call us on 0808 178 3055 or request a call back to arrange an appointment with one of our selected advisers.