The UK rental market is beginning to stabilise after several years of rapid change, with conditions gradually returning to balance as supply increases and demand eases. While rents are still edging upwards, the pace of growth has slowed considerably, and affordability remains a key factor shaping the outlook for both landlords and tenants.

The state of the rental market

Rental conditions are currently the softest they have been in 5 years. Letting agents are reporting around 24% fewer rental enquiries than a year ago the lowest level of demand for August since 2020. This slowdown comes as migration levels fall and mortgage availability for first-time buyers improves, making home ownership more accessible for some.

At the same time, the number of homes available to rent has risen by almost a fifth compared with last year, as more landlords return to the market and some properties listed for sale are instead offered for rent. Homes are taking slightly longer to let, averaging 16 days compared with just 12 in 2023, though still quicker than the pre-pandemic norm of 20 days

This rebalancing is feeding directly into rent levels. Across the UK, rents for new lets are just 2.4% higher than a year ago, the slowest annual growth since 2020, and less than half the 5.1% increase recorded last year. The average rent now stands at £1,301 per month. For tenants, this means increases of around £20 a month compared with a year ago far below the £70 / £80 monthly jumps seen in 2022 and 2023.

More investment boosting choice for tenants

On average, letting agents now have 19 rental properties available compared with just 14 in 2022, when stock was at record lows. This recovery reflects improved yields for landlords, which currently average 6% across the UK and rise above 7.5% in regions such as the North East. With mortgage rates stabilising, conditions are more attractive for investors, and buy-to-let mortgages for purchases rose 60% in the year to Q1 2025.

For tenants, the result is greater choice. The return of landlords, alongside more renters becoming first-time buyers, is easing competition. In addition, homes that struggle to sell are often being switched to the rental market, adding further supply. After years of scarcity, tenants are now less likely to face bidding wars and have more time to choose the right property.

Spotlight on Leicester and the East Midlands

The East Midlands is one of the standout regions in 2025, with the number of homes available to rent up by 31% compared with last year. This surge in supply is helping to take pressure off rents and giving tenants across Leicester, Nottingham and Derby a wider range of options than they have seen in years.

According to the Office for National Statistics (ONS), the average private rent in Leicester reached £1,006 per month in August 2025, up from around £937 a year earlier a rise of 7.4% year-on-year (ONS). In some parts of the local market, particularly new flats, anecdotal reports suggest rental inflation of up to 9% over the past year.

For landlords, conditions remain strong. Average yields in Leicester vary by area, with LE1 achieving around 6.5%, LE3 at 5.2%, and LE2 at 4.4% (CIA Landlords). These figures compare favourably with many UK cities, especially given the region’s relatively affordable property prices.

Looking ahead, forecasts suggest Leicester and the wider East Midlands could see house price growth of around 3.5% in 2025 (Amoka). This combination of stable property values and strong rental yields reinforces the area s appeal to investors.

By contrast, London has seen rental supply rise by only 6%. With yields averaging just 5% and landlords facing steep entry costs typically a deposit of £187,000.

Demand easing as affordability bites

Rental demand, which soared post-pandemic, is now at its lowest level since 2020. Tighter visa rules halved migration during 2024, while stable mortgage rates and rising incomes have helped more renters step onto the property ladder. Changes to mortgage affordability rules in early 2025 boosted borrowing power for first-time buyers by 20%, leading to a 30% jump in first-time buyer mortgages over the past year.

For many renters, however, affordability remains the biggest constraint. Over the last 5 years, average UK rents have risen by nearly £80 a week more than £4,000 annually. Almost one-third of private renters rely on housing benefit to meet costs, yet support has not kept pace with rising rents.

The outlook for 2025

After several years of intense pressure, the rental market is beginning to normalise. The imbalance of too many tenants chasing too few homes is easing as more stock becomes available. However, the high cost of buying a home continues to trap many households in the rental sector, keeping demand higher than before the pandemic.

Looking ahead, rents are forecast to rise by between 2% and 3% over the course of 2025. If migration levels remain subdued and mortgage availability continues to support first-time buyers, rental demand could weaken further, helping to keep inflation in check. Conversely, if house prices rise again or mortgage rates climb, demand could rebound.

For Leicester and the wider East Midlands, conditions look positive for both landlords and tenants. Strong yields, steady demand, and a growing choice of rental homes make it one of the most balanced regional markets in the country right now.

📍 If you’re a landlord or tenant in Leicester, our team at Seths can help you navigate the changing rental market. For expert advice, call us today on 0116 266 9977.