The latest UK Rental Market Index by HomeTrack has revealed that rents for new lets are up by 10.5% over the past year (12.2% a year ago) and annual rental inflation has been in the double-digits for the past 18 months.

Richard Donnell, executive director at HomeTrack, says: “Rental growth in the near term is set to be shaped more by the affordability of renting, and how renters adapt to higher rents, than major shifts in supply and/or demand.”

Demand for rented homes is finally slowing, albeit from a very high base, but rental supply remains low, keeping an upward pressure on rents. HomeTrack says that demand for rented homes is 20% lower than a year ago but still 51% above the 5-year average.

The number of homes for rent is also 20% higher than a year ago but remains 30% below average for this time of year. This supply/demand mismatch is an established feature of the rental market across all regions and countries of the UK.

Average rents have increased by £110 per month over the last year – an annual increase of £1,320. Over the last three years, rents for new lets are up by an average of £2,772 per year, compounding cost-of-living pressures for renters. The affordability of renting will have an increasingly important impact on rental growth in the coming months.