Rents are rising faster again after a sharp slowdown over 2024 and 2025 and are on track to climb as much as 5% by the end of the year.
This is directly 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 6% 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 3% 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.
UK rents have risen 2.6% over the past year, up from a low of 1.6% 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 6% and 12% respectively.
In contrast, Wales has seen the sharpest slowdown in rental growth due to a 7% 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.
Rental growth has jumped in London to 2.9%, up from 1.7% 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.
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%, against 2.6% 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.
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.
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.”
This article is taken from Landlord Today