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Rent growth in the UK remained flat and near record levels, while annual house price growth stagnated, a sign that high borrowing costs and low housing supply are impacting on renters and mortgage holders.

Average private rents in Britain rose by 8.6 percent in the 12 months to July, the Office for National Statistics said on Wednesday. The figure was unchanged from June and still close to the record 9.2 percent rise seen in March after three months of marginal declines.

London was the UK region with the highest rent inflation in July, at 9.7 per cent. The average rent in the capital was £2,114 afterward, up from £1,928 in July 2023 and £1,700 in July 2021, before the cost of living soared.

Annual house price growth remained unchanged at 2.7 percent in June, the ONS said, although month-on-month growth was 0.5 percent. The average house price in the UK was £288,000, £8,000 more than in June.

Nathan Emerson, chief executive of Propertymark, an industry association for estate agents, said the rental market continued to feel “the harsh reality of ongoing pressure on housing demand exceeding current supply”.

In addition to landlords passing on the impact of higher interest rates to tenants through mortgage loans, the lack of available rental properties has also pushed up prices.

Prime Minister Sir Keir Starmer has put pro-development planning reforms at the heart of his new programme for government. These reforms are part of his plans to get Britain building again and address the country’s acute housing shortage.

In last month’s King’s Speech, ministers tabled a bill to reform local planning committees and end “no-fault” evictions of tenants under Section 21.

House prices fell last year largely due to high mortgage costs after the Bank of England raised its base rate to 5.25 percent in an effort to curb inflation.

Expectations that the BoE would cut its key interest rate to 5 percent, as it did on August 1, helped lower mortgage rates and fueled the recovery in property prices.

Independent official data released on Wednesday showed that inflation rose to 2.2 percent in July from 2 percent in June, but the increase was smaller than the BoE had expected, partly due to a sharp decline in underlying price pressures.

Unlike data from lenders such as Nationwide and Halifax, the ONS house price figures include cash buyers, making them the most comprehensive indicator of the health of the sector.

London saw the smallest increase in house prices of any British region at 0.6 percent, but remained the most expensive part of the country with an average price of £523,134 (approximately €523,134). In the north-east of England, however, the figure was only £164,886 (approximately €164,886).

In England, average rent rose 8.6 percent year-on-year to £1,319, while the increase was slower in Wales, rising to £748, and in Scotland to £965.

Jeremy Leaf, an estate agent in north London and former chairman of the housing department of the Royal Institution of Chartered Surveyors, a professional body, said the latest house price data was “another example of the resilience of the property market – very little change in prices at a time of significant election and interest rate uncertainty”.