Emily Windsnap and the Monster from the Deep by Liz Kessler

Emily Windsnap loves her new home, a secret island paradise where humans and merfolk live together.
 
Life is perfect, until Emily accidentally wakes the kraken, a legendary sea monster that has been asleep for nearly a hundred years!
 
As the kraken rises from the deep, putting the future of the islanders in danger, Eily makes a desperate attempt to save them. Suddenly, Emily's dream home feels more like a nightmare...