Daniel Albuquerque and Jamie Lenney

Rent prices have risen by 9% on average in England since the Bank of England’s Monetary Policy Committee (MPC) started raising interest rates in December 2021. Alongside this rise in prices has been a widening in the gap between reported supply and demand in the rental sector, with tenant demand continuing to rise in 2023 amidst falling supply (RICS survey). Is monetary policy causing the rise in rents? In this post, we provide evidence that temporary increases in interest rates are ultimately associated with a decrease in rental prices that follows an initial, but relatively short lived, increase in rental prices and tenant demand. These results also hold across regions in England.