First drop in rental supply in three years pushes rents higher
Rental growth set to accelerate to 4–5 per cent by the end of 2026 as higher mortgage rates keep would-be buyers renting for longer, reducing rental supply
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UK rents are 2.6 per cent higher in the 12 months to July 2026, up from 1.6 per cent in February and are on track to reach 4-5 per cent by the year end
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Higher rents are down to a drop in the number of homes for rent, with three per cent fewer homes available than a year ago, rather than the impact of the Renters Rights Act
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Areas with the biggest declines in homes for rent tend to see faster rental growth
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Demand for renting is starting to increase, enquiries per rental listing are the highest for almost two years as higher mortgage rates keep would-be buyers renting for longer
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Inner London faces the greatest rental market squeeze with both a jump in demand and fewer homes for rent pushing rents higher, the average home buyer needs an extra £35,500 deposit to offset higher mortgage rates
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Rent growth averages 5.4 per cent in lower value rental markets averaging below £750pcm, twice the UK rate, as renters are drawn to areas that offer better value
Rents are rising faster again after a sharp slowdown over 2024 and 2025 and are on track to climb four to five per cent by the end of the year as a result of declining supply, according to the latest Zoopla Rental Market Report.
Mortgage rates have risen since the start of the year, making it harder for first-time buyers to buy homes and keeping more people renting for longer. This has increased demand for rental homes over recent months, while the supply of homes coming onto the rental market has been trending lower than last year in recent months, down six per cent in August.
The number of homes available for rent started to fall in May 2026, ending a three-year recovery in rental supply which helped reduce the level of rent rises over the last two years. There are now three per cent fewer homes for rent across the UK than a year ago. There are wide regional variations but areas with the biggest declines in homes for rent are typically those registering faster rental growth than last year.
Demand for rented homes typically increases between July and September, but the rise in mortgage rates since the start of the year has added to renter demand, particularly in London. The combined impact of rising demand and falling supply means the number of enquiries per UK rental listing is six per cent higher than a year ago. Enquiries have risen to 5.3 per listing, the highest level for almost two years (22 months) as competition starts to increase once again.
Rent growth is picking up pace where the choice of homes is shrinking
UK rents have risen 2.6 per cent over the past year, up from a low of 1.6 per cent growth in February 2026. The average rent now stands at £1,340 a month. With mortgage rates remaining elevated, and new investment in rental stock by landlords still muted as a result of higher costs and more regulation, rents are expected to keep climbing over the coming months, with growth set to hit between four and five per cent by the year end.
Looking across the country, Zoopla’s data reveals that rents are typically rising fastest where the number of homes available to rent has declined the most. Growing scarcity of homes for renters is resulting in higher rents rather than a big increase in demand. London is the outlier where rental supply and demand are tightening at the same time.
All regions and countries of the UK are registering positive rental inflation in July 2026 and five areas have seen an increase in the pace of rental growth over the past year, the others have seen a moderation in growth.
London and the Yorkshire and Humberside regions have seen the biggest increase in rental growth over the last year, with both areas recording an above average drop in the number of homes for rent, down six per cent and twelve per cent respectively. In contrast, Wales has seen the sharpest slowdown in rental growth due to a seven per cent increase in the number of homes for rent, boosting choice for renters.
These trends in rents reflect the interaction of supply and demand across local markets. Our data suggests that higher rental inflation is not down to the Renters Rights Act in England as Scotland is experiencing the same trends of fewer homes for rent and higher rental inflation.
Higher mortgage rates add £35k to London buyers’ deposit boosting rental demand
Rental growth has jumped in London to 2.9 per cent, up from 1.7 per cent a year ago on reduced supply and rising demand. The impact of higher mortgage rates has hit home buyers in London much harder than the rest of the country with Zoopla data showing that the average London buyer needs to find an extra £35,500 for their deposit to offset the higher mortgage rates introduced this year, nearly double the £18,200 needed nationally.
This has driven a much stronger pick up in demand for rented homes compared to the rest of the country, where the cost of higher mortgage rates on buyers is less severe. The impact is most pronounced across the inner areas of London where house prices are highest and many renters want to live (SE, E, N, NW, SW, W, EC and WC postal areas). Across these areas, demand is higher than last year while the number of homes for rent is 13 per cent lower, creating scarcity and pushing rental growth up to between three and four per cent.
Rent growth strongest in more affordable markets
The two-speed market that has defined the rental sector since 2022 remains firmly in place. Areas with average rents below £750pcm are seeing growth roughly double that of the national rate, 5.4 per cent, against 2.6 per cent nationally. Rents are also rising faster in the highest value areas due to the trends in London.
In less expensive areas, renters have more capacity to absorb rent rises before hitting an affordability ceiling, whereas in the most expensive areas, rents are already stretching what renters can pay, capping how much further rents can increase.
Many of the cheapest areas to rent are smaller towns. Some of the sharpest rent rises are in smaller, more affordable markets, with fewer landlords and less new investment, largely in Scotland and northern England. Dumfries (+11.3 per cent), Carlisle (+8.8 per cent) lead the postal areas with the fastest increase in rents this year. What’s striking is that most of these areas have weaker demand than last year but rents are climbing because homes to rent are becoming scarcer, not because more people are competing for them. This makes a case for growing supply to help ease the pressure on rents and renters.
Rental growth set to rise further by year end reaching plus four per cent
All the signs point to a continued acceleration over the rest of the year. The latest data shows that the underlying rate of rental growth is higher than the annual figures would suggest. Zoopla expects the headline rate of rent growth to climb further. On current trends, rents are on track to climb by between four and five per cent by the end of 2026, up from 2.6 per cent today and more in line with earnings growth. This is driven by the combination of higher mortgage rates locking renters in for longer and continued low investment in new rental stock by landlords and investors.
Richard Donnell, Executive Director at Zoopla, says, “The rental market is starting to tighten again after three years in which the supply of homes for rent has steadily improved and rental growth slowed easing the pressure on renters. Our latest report shows how sensitive the rental market is to even modest changes in how many homes are available for rent.
“Higher mortgage rates are not just impacting the sales market, they are keeping more would-be first-time buyers in rented homes for longer, reducing available supply just as the seasonal upturn in demand gets into full swing. This is pushing rents higher again, mainly in regions where the availability of homes for rent has declined the most, although affordability remains an important constraint on how far rents can rise.
“The upward pressure on rents is greatest in London, where higher mortgage rates have had the biggest impact on home buyers, and in more affordable rental markets where renters have greater capacity to absorb increases. Low levels of new investment by landlords and renters renting for longer mean we expect UK rents to increase by 4–5 per cent by the end of the year. Growing the number of homes for rent through increased investment is the most sustainable route to boosting choice for renters and ensuring stability in rent levels over the long run.”
Allison Thompson, Chief Lettings Officer, LRG, says, “These latest figures reflect the strong level of tenant demand we are seeing, but the real interest lies behind the headline figures, specifically regarding the relationship between the sales and rental markets. Higher mortgage costs mean that some tenants are renting for longer than perhaps planned, while a previous dip in landlord investment is limiting replacement stock.
“Yet in London and the South East, falling property prices substantially improve yields. Not surprisingly, we are seeing established investors looking to expand. Clearly serious landlords recognise this unusual set of circumstances as a rare opportunity which they are keen to capitalise on.”
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