Yields continue to rise steadily according to Paragon Mortgages March Buy-to-Let Index. The latest report reveals that yields rose for the second month in a row to 6.82%, up from 6.76% last month.

The steady rise in yields is due to a significant pick-up in rents achieved by landlords since last summer, while property values have stabilised. The average rent has risen from £9,524 in August 2004 to £10,520 in February 2005 - an increase of just under £1,000 in 6 months.

John Heron, managing director of Paragon Mortgages, says: "With demand for rented accommodation from tenants steady or growing in many areas and this demand not matched by supply, landlords have been able to achieve higher rents and therefore higher rental yields.

"Whilst owner-occupiers have been biding their time, investors have been growing their portfolios from an average of 11 properties last May to a current average of 13," he adds.