Rent growth is set to rise by up to 5% by the end of the year as rental supply falls, according to Zoopla.
The latest Rental Market Report finds that rents are rising faster again after a sharp slowdown over 2024 and 2025, standing at 2.6% higher in the 12 months to July 2026, up from 1.6% in February. The average rent now stands at £1,340 a month.
Zoopla reports that 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 resulted in 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.
The report says that 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 6% higher than a year ago. Enquiries have risen to 5.3 per listing, the highest level for 22 months, as competition starts to increase once again.
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, with the others seeing 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.
The report also finds that the two-speed market that has defined the rental sector since 2022 remains firmly in place, with areas with average rents below £750pcm 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.
Zoopla says that this is due to renters in less expensive areas having 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.
Rent growth is expected to continue to accelerate over the rest of the year, with the latest data showing 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, reaching between 4% and 5%, 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, said: “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.”
