The thriving rental market is cooling off according to new figures from the Homelet Rental Index .

In Greater London the average rent for new tenancies in the three months to the end of May was £1,563.

This was a 1.3% increase on the three months to April, when the figure was £1,543, and a sharp increase on March when the rise was only 0.5%.

However, it was only a 6.2% increase on the same three month period to May 2015, compared to annual increases of 7.7% in February, March and April.

The index revealed this cooling off was also seen nationwide.

HomeLet, which is part of Barbon Insurance Group (BIG) believes affordability ceilings are being approached but the cooling may also be part of a broader story about economic uncertainty ahead of Brexit as there has been a similar tail off in the rate at which house prices are rising.

BIG chief executive officer Martin Totty said: “Across the housing market, it may be that uncertainty ahead of this month’s European Union referendum vote is a factor – some people may even be choosing to rent rather than buy given the unpredictability of the outcome and its impact.

“As we saw at the time of the 2008 financial crisis, house prices and rents are not immune from wider economic shocks.

“However, looking beyond shorter-term factors, net population growth and the rising rate of employment remain the key demand-side drivers for residential property; they look set to continue to run ahead of public and private sector initiatives to increase supply and keep pace.”

The index showed rents agreed on new tenancies across the UK over the three months to the end of May were up by 4.4%, compared to the same period in 2015.

That compares to an annual increase of 5.1% in April and 7.6% in May last year.

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