Property group Hamptons has downgraded its 2025 rental growth forecast from 4.5% to 1.0% across Great Britain, reflecting a faster-than-expected market slowdown.
The rental market has softened more quickly than anticipated, with rents on newly let properties rising just 0.4% year-on-year across Great Britain in June – the weakest growth since August 2020, the group said.
This cooling trend is no longer confined to London, with rental declines now recorded in the capital (-2.5%), Wales (-0.9%) and Scotland (-0.5%). Even in the North of England, where rents had been rising fastest for most of the last 12 months, annual increases have slowed from 8.1% in June 2024 to just 1.8% in June 2025.
A shift in the market
The primary driver behind this cooling rental market has been the transfer of demand from the rental sector to the sales market, Hamptons said.
As mortgage rates have fallen, homeownership has become more accessible, leading to strong first-time buyer activity. First-time buyers purchased a record 33% of homes sold across Great Britain in the first half of 2025.
This shift has resulted in 11% fewer tenants looking for homes across the country in the first half of 2025 compared to the same period in 2024, with tenant demand now 20% below 2019 levels. The number of tenants registering in lettings branches across Great Britain was down 17% on the same time last year and is now running 28% below 2019 levels.
For would-be first-time buyers with small deposits, falling mortgage rates have pushed the monthly cost of purchasing below the cost of renting. Anyone with a deposit of at least 10% is now likely to find themselves better off buying than renting. This has particularly affected tenant demand in more affluent areas, where tenants are most likely to buy.
Rebalancing the market
While tenant demand has weakened, there were 8% more homes available to rent across Great Britain in the first half of 2025 than during the same period in 2024.
This doesn’t reflect increased landlord investment, but rather a slowdown in tenant demand, with properties taking longer to let, Hamptons said.
Additionally, tenants exiting the rental sector are not being replaced at the same pace. This has contributed to a greater pool of available rental homes.
“Lower mortgage rates have also reduced, albeit not eliminated, the financial pressure on landlords. After several years of rapidly rising costs, many landlords who are now remortgaging are finding more favourable rates, diminishing the need to pass on higher costs to tenants,” the group said.
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