Hamptons estate agents’ latest report paints a concerning picture for the UK rental market. By the end of 2026, UK rents are predicted to jump by a substantial 25%, making the average monthly rent approximately £1,600. Concurrently, house prices are expected to dip by 5% during the same timeframe, primarily due to soaring interest rates rendering homeownership a luxury for many.

This year alone, Hamptons forecasts that the average rent for newly-let properties in Britain will climb by 8%. By 2026’s end, an additional surge of 17% is anticipated. The primary driver behind this rise is the shift of numerous landlords from fixed-term mortgages to those with significantly steeper interest rates. To put things into perspective, the average interest rate for a five-year term currently stands at 6.19%, a marked increase from the 2.64% in December 2021. Additionally, the availability of rental properties across Britain has diminished. As of July, the number of rental homes accessible has decreased by a staggering 43% compared to the same time in 2019. This shrinking pool enables landlords to charge higher rents while enjoying a reduced risk of tenant turnover.

David Hannah, Group Chairman of Cornerstone Tax – a prominent figure in UK property tax expertise – attributes this escalating rental landscape largely to the Bank of England’s (BoE) efforts to combat inflation. This mission has indirectly led to a mounting burden on the interest rates of mortgages, a cost landlords are now shifting onto their tenants. With whispers of a potential further interest rate increase by the BoE in September, Hannah is concerned that rental prices might witness an even steeper ascent.

Hannah weighed in on the rental market’s current state, commenting, “Rent prices are going up because landlords’ costs, particularly as a result of rising interest rates, are increasing. However, this is not the whole picture as there is still a chronic undersupply of housing in the UK in popular locations. For example, rent rises in London post-pandemic have been as much driven by a lack of available properties as they have been by inflationary pressure. The situation has been particularly exacerbated for houses in multiple occupation (HMO) landlords – these are landlords who typically include the costs of energy, heating, and other bills into the rent. The soaring increase in energy costs has, as a result, had to be factored into the rent for these types of properties. Accordingly, rent rises in these types of properties exceed inflation by a considerable margin.

“I think the rental market is filled with uncertainties at the moment, with rising rents making it less attractive from a renter’s standpoint and rising house prices making it less desirable for buy-to-let landlords to grow their portfolios. Our research shows that many landlords were not prepared to deal with the current obstacles facing the rental market as 1-in-5 say they became landlords without the sufficient knowledge needed and have lost thousands as a result.”