"Like wages, rents don’t often fall. In fact, there have only been six months over the last 14 years when rents have fallen nationally on an annual basis. And when they do, it’s usually in real terms, rather than absolute terms"
- Aneisha Beveridge - Hamptons
Newly agreed rents in Great Britain fell by 0.4% year-on-year in August 2025, reaching £1,387 per month. This marks the joint second-largest annual decline since the Hamptons Lettings Index began in 2011 and the biggest fall recorded since the post-Covid period.
Rental growth has been slower than inflation for the last nine consecutive months, providing tenants with some financial relief amid rising living costs. Despite this recent slowdown, rents have still risen faster than the Consumer Price Index (CPI) over both five- and 10-year periods, increasing by 31.0% compared with 24.9% CPI over five years, and 41.0% versus 33.7% CPI over a decade.
Had rents tracked inflation over the past five years, the average tenant would be paying £1,308 per month, saving £952 annually. Over 10 years, tenants would now pay £1,253 per month, a difference of £1,611 per year. If rents had followed the trajectory of air fares since 2020, monthly costs would be £1,934.
London led the regional declines, with Inner London rents down 5.8% year-on-year. Four regions now report negative rental growth overall.
The cost of renting a home in Great Britain has been increasing more slowly than inflation for around nine months, offering tenants some respite as food and travel costs rise. In August 2025, newly agreed rents fell by 0.4% year-on-year, equivalent to a £6 reduction per month. This represents the largest annual fall since Covid and the joint second-largest fall in rents since the Hamptons Lettings Index started in March 2011.
With rental growth now turning negative, eight months, or likely nine, including August, have seen rents rise more slowly than CPI inflation. The latest data showed that inflation increased by 3.8% in July, outpacing stagnant annual rental growth of 0.0%. August’s CPI figure is expected to show further inflation growth.
While rental growth contributed heavily to CPI increases during 2022 and 2023, it is now likely to ease the headline inflation rate. Private rent changes account for 8.1% of the overall CPI figure, and last month housing costs represented nearly a quarter (24.2%) of the 3.8% CPI increase.
Despite the recent slowdown, rental costs have been rising sharply over the last five years. Newly agreed lets in Great Britain increased by 31.0%, outpacing CPI growth of 24.9% over the same period. Over 10 years, rents rose 41.0%, compared with a 33.7% increase in CPI.
If rents had tracked inflation over five years, the average rent would be £1,308 per month, offering tenants £952 in annual savings. Over 10 years, tenants are paying £1,611 more each year than if rents had followed CPI.
Rents vs the inflation basket
Rents have broadly tracked the middle of the inflation basket over the past five years, similar to the cost of package holidays. If rents had followed air fares, tenants would now pay £1,934 per month. Conversely, if rents had tracked camera prices, the monthly cost would be £973, the same level recorded in April 2017.
Regional rents
Rents are now falling in four of 11 regions across Great Britain. London recorded the steepest decline, with annual rents down 3.3%. Inner London saw the largest fall at 5.8% over the past 12 months, the biggest decrease since May 2021. Rents in Inner London are now £179 below their October 2024 peak and 1.3% lower than two years ago.
Yorkshire & Humber (-0.5%) and the North East (-0.2%) also saw annual declines for the first time since November 2019 and February 2020, respectively. Other regions maintained positive growth, although the pace has slowed.
New lets versus renewals
The average cost for renewing a rental contract in Great Britain rose 4.3% in the year to August 2025. This leaves renewals £90 cheaper per month than new lets. While this gap is narrower than the £170 peak seen in October 2023, it remains above pre-Covid levels, when the difference typically ranged between £10 and £20.
Renewal costs would need another 5% increase to match growth in new lets since August 2020. However, the current divergence, renewals up 4.3% versus new lets down 0.4%, is unlikely to continue. Rental growth on renewals is expected to slow as affordability pressures increase.
In August, the number of unlet homes was 8% higher than the same period last year, while tenant demand dropped slightly, with 4% fewer renters starting their search. Rental stock has remained below 2019 levels for much of the past five years, but the gap is narrowing. In August 2025, there were 16% fewer homes available than in August 2019, compared with 21% fewer in July.
“For most of the last five years, rapidly rising rents were a key contributor to the UK’s high inflation story," explained Aneisha Beveridge, head of research at Hamptons. "But after several years of rapid rental growth, the tide is finally turning. For the ninth month in a row, rents have risen more slowly than inflation, offering tenants a rare moment of financial respite. While the monthly savings may seem modest, they mark a significant shift in the rental market’s role in driving inflation."
“Over the longer term, rents have consistently outpaced inflation, which means tenants today are paying more than they would have if rents had simply tracked CPI. For the most part, this has mirrored the rising cost pressures facing landlords. But this recent slowdown suggests the market is recalibrating. With affordability stretched and demand softening, landlords are having to adjust to attract tenants."
“Like wages, rents don’t often fall. In fact, there have only been six months over the last 14 years when rents have fallen nationally on an annual basis. And when they do, it’s usually in real terms, rather than absolute terms."
"What we’re seeing now is a real terms fall in rents, when inflation and wages outpace rental growth, which leaves tenants feeling better off. It’s a sign that the rental market is responding to wider economic pressures, and it could help ease the inflation headache for policymakers in the months ahead.”
