Research from mortgage specialist Pegasus Insight reveals a shift in landlord intentions regarding rent increases in the next year. While a significant number of landlords still plan to raise rents, the proportion intending to do so has dropped in comparison to last year. This indicates a subtle change in the market dynamics as landlords weigh up rising costs and potential tenant affordability challenges.
The latest Landlord Trends report for Q2 2025 shows that 61% of landlords are considering rent hikes over the coming 12 months. This is notably lower than the 78% of landlords who reported similar plans in Q2 2024. This shift suggests that, while the desire to increase rents remains strong, many landlords are becoming more cautious as market conditions evolve.
For landlords who are planning increases, the anticipated average rise is 6%. This is slightly higher than the 5% average rise predicted in Q2 2024, pointing to a continued willingness to push rents higher, despite the more cautious overall approach. The fact that the average rent increase remains significant indicates that many landlords still face pressure to meet rising operational costs.
The trend in anticipated rent increases mirrors the recent official data from the Office for National Statistics. The ONS reported that UK private rents rose by 5.7% in the year to August 2025, reaching an average of £1,348 per month. This uptick in rent prices further underscores the ongoing challenges faced by landlords as they navigate increasing costs.
While fewer landlords plan rent hikes than in previous years, those who do are targeting substantial increases. This suggests that the rental market may be reaching its natural limit in terms of affordability. Many landlords have already adjusted rent levels to reflect current market conditions, and others are becoming more attuned to the fact that their tenants may soon be unable to absorb additional increases.
The driving forces behind these rent hikes are largely related to rising costs. Maintenance, property compliance, and mortgage servicing are all cited as primary factors contributing to landlords’ decisions to increase rent. As operational costs continue to climb, landlords feel compelled to raise rents to maintain profitability.
However, some landlords are becoming more cautious about further increases. Affordability concerns for tenants, coupled with rising living costs across the board, are causing some landlords to pause before implementing rent hikes. This shift reflects an emerging awareness of tenant vulnerabilities and the broader economic climate.
The impending Renters Rights Bill is another key factor influencing landlord decisions. Set to be enacted in mid-2026, the legislation will limit rent increases to once per year, and bring other significant reforms to the private rental market. These reforms will include the abolition of Section 21 evictions and the introduction of open-ended tenancies.
In response to the upcoming changes, many landlords are adjusting their rent levels in advance. The Renters Rights Bill will introduce constraints on rent increases and ensure that tenants are better protected against sudden price hikes. As a result, landlords are evaluating their rental strategies, with some opting for more gradual increases before the new legislation comes into effect.
Mark Long, the founder of Pegasus Insight, explains that landlords are under significant pressure from rising operational costs and the upcoming policy changes. Despite this, their instinct to increase rents remains strong. Long points out that many landlords are trying to balance these pressures with the need to keep rents affordable and competitive.
However, Long’s research also suggests that the rental market may be approaching an affordability ceiling. If rents increase too much, there is a risk that tenant demand could falter, as the market would no longer be sustainable for many renters. This phenomenon, known as price elasticity, could cause landlords to lose tenants or face longer void periods.
“Landlords are becoming more attuned to the risks of over-inflating rent prices,” says Long. “They recognise that pushing rents too high may result in vacancies, which could end up costing them more than the additional rent would generate.” As a result, landlords are carefully considering how much they can reasonably increase rents without losing tenants or straining their budgets.
The upcoming Renters Rights Bill continues to play a significant role in landlords’ decision-making. With the potential for rent increase limits and the introduction of rent tribunal challenges, landlords are reviewing their portfolios carefully. Many are preparing for the upcoming legislative changes by ensuring their rent levels remain sustainable in the long term.
“This period is one of transition for the Private Rented Sector,” says Long. “Landlords are facing an increasingly complex environment with rising costs and tightening regulations. As they adjust to these new realities, many are adopting a more cautious approach to rent hikes, even if they are still planning some increase in the short term.”
Despite the moderation in rent increase intentions, the prospect of rent inflation is still very real. Long believes that if operational costs continue to rise and regulations become more stringent, we could witness a new wave of rent inflation in the private rental market. Even as landlords are more mindful of tenant affordability, the pressure to raise rents remains strong.
This evolving landscape suggests that the rental market will continue to be a balancing act for landlords. As they navigate rising costs, legislative changes, and tenant expectations, landlords will need to adapt their strategies to remain profitable while ensuring their rents remain competitive and fair.
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