"While the latest ONS data shows a slowdown in rental growth, the underlying pressure has not gone away. Demand remains strong, supply is still tight, and that imbalance continues to feed through into pricing"
- Alex Upton - Hampshire Trust Bank
The annual growth rate has declined from 4.4% recorded in November 2025, representing the lowest inflation rate in over two and a half years.
England saw average rents rise to £1,424, a 3.9% increase of £54 compared to December 2024. Wales recorded stronger growth, with rents climbing 5.7% to £822, while Scotland experienced more modest gains of 2.8%, bringing average rents to £1,018. Northern Ireland's average rents stood at £873 in October 2025, up 5.7% year-on-year.
Regional variations within England proved significant. The North East continued to lead with the highest rental inflation rate at 7.9%, though this represented a decrease from the 8.4% recorded in November. London experienced the slowest growth at 2.1%, down from 2.8% the previous month. The capital's annual inflation has decelerated sharply, falling 9.4 percentage points since its November 2024 peak of 11.5%.
Average rent levels varied considerably across the country. London commanded the highest average at £2,268, while the North East recorded the lowest at £762. Among local authorities, Kensington and Chelsea topped the rankings at £3,651 per month, with Dumfries and Galloway in Scotland at the opposite end with £543. Outside London, Oxford in the South East had the highest average monthly rent at £1,913.
Property type and size influenced rental prices substantially. Detached properties averaged £1,562 per month, compared to £1,336 for flats and maisonettes. Properties with four or more bedrooms commanded £2,039 monthly, while one-bedroom properties averaged £1,109.
Scotland's rental inflation of 2.8% marked the lowest annual rise in over four years. The rate has been declining since the record high of 11.7% in August 2023. Wales similarly saw its growth rate ease from the record 9.9% recorded in November 2023. Northern Ireland's inflation has been moderating since its April 2024 peak of 9.9%.
England's rental inflation of 3.9% represents the lowest rate since May 2022, continuing a downward trend from recent peaks. However, regional disparities remain pronounced, with the North East's 7.9% growth rate nearly four times higher than London's 2.1%.
Housing market
The housing market showed different dynamics. Average UK house prices increased 2.5% to £271,000 in November 2025, accelerating from 1.9% growth in October. England's average reached £293,000 with 2.2% growth, Wales stood at £209,000 with 0.7% growth, and Scotland hit £193,000 with 4.5% growth. Northern Ireland recorded the strongest house price inflation at 7.1% in Q3 2025, reaching an average of £193,000.
Within England's housing market, the North East led with 6.8% house price inflation, up from 5.2% in October. London bucked the trend, recording a 1.2% price decline, though this represented an improvement from the 2.6% fall seen in October.
Tom Bill, head of UK residential research at Knight Frank, commented, “UK rental inflation has eased, but we continue to see pressure on rents in London and the south-east upwards as more landlords sell up due to regulatory and tax changes. The Renters’ Rights Act will be a key test for the lettings market when it comes into effect this year. Some prospective landlords are holding off to see if the court system copes with the changes around no-fault evictions and whether the new rules raise the risk of void periods.”
Richard Donnell, executive director at Zoopla comments, "Rental inflation is slowing as the supply-demand gap narrows sharply. Improved affordability for first-time buyers and a large drop in international migration mean weaker rental demand, while there are 14% more homes for rent than a year ago, which is boosting choice for renters. Rental inflation is returning to normal, and rents are on track to rise by just 2.5% in 2026, the lowest for four years.
"Budget uncertainty hit demand for housing in the sales market, while more homes for sale are boosting choice and supporting a buyers' market, which is keeping price growth in check. There has been a strong rebound in demand over the first weeks of 2026, but demand is 10% below last year and in line with 2024. There is demand for housing, but sellers need to price realistically to achieve a sale in 2026."
Alex Upton, managing director, specialist mortgages & bridging finance, Hampshire Trust Bank, said, “While the latest ONS data shows a slowdown in rental growth, the underlying pressure has not gone away. Demand remains strong, supply is still tight, and that imbalance continues to feed through into pricing."
“Landlords are facing a growing list of considerations. The Renters’ Rights Act, combined with tax and cost pressures confirmed in the Budget, including changes to mortgage interest relief and dividend taxation, is prompting many to take a more strategic view of their portfolios. Some are moving into limited company structures, others are rebalancing into semi-commercial or mixed-use assets, and many are reshaping how their funding aligns with long-term plans."
“Brokers are playing a central role in this shift, helping landlords navigate complex changes, structure sustainable funding, and stay confident in a market that is becoming harder to predict."
She added, “The private rented sector cannot function without adequate supply. Tenants rely on good-quality homes, but that supply depends on investors being able to operate with clarity and stability. If the combined effect of regulation, taxation and cost becomes too great, we risk seeing more landlords exit and availability fall further.
“For lenders, this puts the emphasis on flexibility, consistency and real-world structuring. Brokers and landlords need funding that reflects the dynamics of today’s market, from portfolio restructuring and reinvestment to more complex transitions between short-term and long-term funding. The focus must be on enabling good deals to progress, not defaulting to rigid criteria that reduce options. In a market shaped by structural change, specialist lenders have a critical role to play in supporting tailored, long-term solutions.
“Raising standards is essential. But if we want a rental market that remains accessible and resilient, we need a regulatory and funding environment that gives landlords and brokers the confidence to stay invested.”
Nathan Emerson, CEO of Propertymark, said, “Any increase in potential average rental costs rightly brings concerns for consumers, especially those who are squeezed by cost-of-living pressures. Although we have witnessed a rental inflation trend further downwards, the rental market continues to suffer from a chronic undersupply of properties versus actual demand.
“We currently sit in a situation where many letting agents continue to highlight concerns regarding the impact of updated legislation and the real-world effect such changes are having on many landlords' ability to operate. This, coupled with additional and often more complex tax frameworks, has brought profound change within the sector and applied additional pressure on already overstretched stock levels.”
