Rental growth has slowed of late and while that’s good news for tenants it can be a concern for landlords. Understanding what’s caused the slowdown and what it means for tenant affordability in Peterborough is key.
Figures from the Office for National Statistics (ONS) show that average UK monthly private rents increased by 7% in the 12 months to May 2025, but this was down from 7.4% in the 12 months to April 2025 and marked the fifth consecutive month of slowing rental inflation. In the East of England rents rose 4.7% year on year, to £1,182 a month with an average yield of 6.6%. There are two main reasons why the slowdown is happening.
More properties are available
In part, the slowdown is due to a continuing increase in the supply of rental homes. Figures from Rightmove’s most recent quarterly Rental Trends Tracker showed that the overall number of rental homes available was 18% ahead of last year for the first quarter.
More tenants are becoming homeowners
Increased mortgage affordability, lower interest rates and a stamp duty rush also took a swathe of demand out of the rental market in the first quarter, with tenants becoming first-time buyers instead. The number of enquiries per rental property outside of London was 12 in the first quarter, down from 16 at the same time last year. For the east of England, it’s 13.
What does it mean for tenant affordability?
These are important influences on the rental growth slowdown but it’s also worth considering that the market may again balance out. Although there are more properties available for rent, some landlords are choosing to leave the market ahead of the Renters’ Rights Bill and the changes and increased costs it will bring. Similarly, the need to upgrade properties to become more energy efficient is also prompting landlords to leave. That could constrain the number of properties available if other landlords don’t choose to buy those properties and they go to traditional homeowners instead.
This constriction of supply will be important in a market already facing excess demand and so could force prices back up. But understanding the affordability ceiling for tenants will also be important. That is influenced in part by wage growth which is also slowing. According to figures published by the ONS in June, the annual growth in employees’ average regular earnings (excluding bonuses) was 5.2% in the period February to April 2025, down from 5.5% in the previous three-month period.
Inflation and interest rates will also impact how much tenants can afford to pay on rent. Inflation is above the 2% target, up by 3.4% in the 12 months to May 2025 and by 3.5% in the 12 months to April. The next inflation announcement is due on 18 July. This could influence the next base rate decision from the Monetary Policy Committee who could hold the rate at 4.25% at their next meeting in August or even choose to raise interest rates again.
What landlords should do
Although the market has slowed landlords shouldn’t panic, however. Rental demand is still plentiful, but success will rely on operating a property portfolio that matches the demand of local markets like Peterborough, as well as efficient property management.
We Can Help
At Progressive Lets we are experts in the rental market in the Peterborough area and help landlords find and manage properties within a 50-mile radius. Get in touch to find out more.
