Skyrocketing rents outperformed mortgages, witnessing a 21% increase over the past three years
The UK's private rental market has witnessed a significant surge in rental costs over the past three years. This increase is primarily attributed to a surge in demand for rental properties combined with a relatively static supply of private rented homes [1][2][3][4].
The demand for rental properties has been driven by a strong labour market, increased migration for work and study following the pandemic, and higher mortgage rates, which made it harder for first-time buyers to enter the property market [2][4]. As a result, the number of people needing rental accommodation has increased, putting pressure on the already limited supply of private rented homes.
Inflation has also played a role in the rising costs. From 2022 to 2025, rental prices for two-bedroom properties, for example, increased by about 22.4%, reflecting broader inflationary pressures in the private rental market [1][3]. Furthermore, limited new investment by landlords has restricted the supply side, exacerbating rent increases as demand outpaces availability [2][4].
Geographically, the largest rent increases have occurred in more affordable outer London areas and certain northern towns like Oldham, Wigan, and Bolton, where rents rose by over 31% since 2022 [2][4]. London overall remains the area with the highest rents, with some districts experiencing monthly rent increases of up to £400 since 2022 [2][4].
The average UK rent currently stands at £1,283 a month [5]. Rent increases have hit lower income renters hardest, with the average monthly cost of renting a home in the UK having risen by £221 in three years [6].
However, recent data suggests that rent increases are starting to slow down. Rents are rising at a slower pace as tenant demand cools and affordability pressures start to bite [7]. Average UK rents increased by 2.8% in the 12 months to April, less than half the 6.4% recorded last year [8]. This represents the slowest pace of rental growth in four years.
The government's new 95% mortgage guarantee scheme, designed to help first-time buyers and home movers with small deposits, may also help alleviate some of the pressure on the rental market [9].
In conclusion, the main factors contributing to the rising rental costs are increased post-pandemic demand due to a stronger labour market and migration, constrained rental supply due to limited landlord investment, and broader inflationary trends impacting housing costs [1][2][3][4]. As the rental market continues to evolve, it will be interesting to see how these trends develop and how policy interventions may impact the market in the future.
- The surge in rental costs in the UK's private rental market over the past three years can be partially attributed to increased demand for personal finance advice on investing in rental properties.
- For those considering expanding their personal-finance portfolio to include property, it's essential to keep an eye on interest rates, as they significantly impact the affordability of investing in real-estate.
- Despite the ongoing increase in rental costs, the slowdown in rent increases as of April 2023 indicates a potential shift in the housing-market trend, offering a window of opportunity for long-term investors to jump into the property market.
- The government's new 95% mortgage guarantee scheme, aimed at assisting first-time buyers and home movers with small deposits, could lead to a decrease in demand for rental properties, potentially easing the pressure on the rental market in the future.
