Tenant demand for rental homes has eased over the past year but remains strong across most of the UK, according to research by mortgage market specialist Pegasus Insight.

Its latest Landlord Trends report for the second quarter of 2025 found that 71% of landlords rate demand in their area as strong – 33% describing it as very strong and 39% as quite strong – down from 82% a year earlier. Only 4% of respondents said demand was weak, while 18% reported it as average.

The cooling follows a period of intense competition for rental properties, driven by limited supply, post-pandemic migration and continued pressure on affordable housing. While levels remain high by historic standards, softer demand could influence rental growth, yields and investment appetite in some regions.

REGIONAL DIFERENCES

There are notable regional variations. Yorkshire & Humber leads the table, with 81% of landlords reporting strong demand and more than a third rating it very strong. By contrast, the figures in London and the East Midlands stand at 64% and 63% respectively.

The report points to several possible causes. Around one-third of students nationwide now live at home, with the proportion higher in London and parts of the Midlands, easing pressure on local rental markets. Affordability constraints are also encouraging more tenants to stay put, share accommodation or remain with family, particularly in high-rent areas.

Meanwhile, the expansion of remote and hybrid working has allowed tenants to move further from traditional commuter belts.

Bethan Cooke, director of Pegasus Insight, said: “Even after an 11% drop, over seven in ten landlords are still seeing strong tenant demand, which shows just how competitive the rental market remains.

“However, the fact that demand has eased for the first time in a while suggests we may be at a turning point. For landlords, this could mean less scope for rent increases in some areas, especially where affordability is already stretched.

“That said, demand levels remain far above those of five years ago, and the fundamentals of the private rented sector are still solid.

“The question is whether this is the start of a sustained rebalancing between supply and demand, or just a short-term pause in the face of wider economic pressures. Either way, landlords and lenders will be watching closely.”