What Can Investors Expect From The 2025 Rental Market? 

Market Remains Competitive

Although rental growth in 2025 is expected to be more moderate than in 2024, competition in the rental market will remain strong. This creates an environment where landlords and property investors can still capitalise on strong demand while benefiting from better market stability. 

Despite steady rental growth, competition in the rental market will remain robust, with tenants competing for a limited supply of available properties. Data from property portals reveal that rental properties were let 20% faster in 2024 compared to five years ago. This trend indicates that demand continues to outpace supply. Ensuring that investors can maintain high occupancy rates and achieve quicker returns on their investments. In 2025, this trend is expected to stay, giving landlords a better chance to secure reliable tenants.

Furthermore, investors who stay on top of evolving tenant demands will have an opportunity to maximise rental income. For example, properties that meet specific tenant preferences, such as those with home office spaces, modern amenities, or energy-efficient features, will likely see higher rents. 

Mortgage Rates Are Set to See a Fall

In December 2024, the average mortgage rates stood at 4.83% for a 5-year fixed rate and 5.08% for a 2-year fixed rate. However, forecasts for 2025 suggest that these rates are likely to fall to around 4%. This anticipated decline is based on projections of four base rate cuts throughout 2025.

A reduction in mortgage rates to around 4% will make borrowing more affordable for property investors. Particularly those relying on financing to acquire new properties or refinance existing ones. Lower mortgage payments can significantly improve income, increasing the profitability of rental properties. Additionally, buyers may be more inclined to enter the property market, therefore increasing demand for housing. This rise in demand could drive property values higher, creating opportunities for capital appreciation in addition to rental income. Investors could see their properties appreciate more quickly as the market becomes more active.

While the outlook is positive, these rate predictions are reliant on the Bank of England following through with the anticipated rate cuts. Any external factors, such as unexpected inflation pressures or economic disruptions, could affect these forecasts. Therefore, investors should monitor these closely and adapt their strategies accordingly.