Rental incomes are 16.4% higher than this time last year according to Paragon Mortgages. As a result, average rental yields now stand at 6.76%, the highest level for 6 months.

John Heron, Managing Director of Paragon Mortgages, said: "At the start of 2005, rental incomes are rising, helped by robust levels of tenant demand. This is in part attributable to a slower owner-occupier market and the ongoing impact of affordability constraints on first time buyers. This is now clearly feeding through into higher yields, which have followed a generally upward trend since last September."

For the second month in a row Greater London saw the largest increase in yields. Greater London landlords are now achieving yields of 6.1% on an average property worth £264,186. Yields in Yorkshire (+ 7.6%), West Midlands (+ 6.8%), East Anglia (+ 6.4%) and the South East (+ 6.6%). Those regions experiencing a fall in rental yields witnessed the largest increases in property values.