Strong tenant demand for rented accommodation has pushed the average rental income generated by landlords to an all-time high, according to Paragon’s October buy-to-let index. Average rents hit £11,066 during October which is 10.2% higher than a year ago.

In addition, yields have continued to remain steady at 6%, while total annual returns on a property purchased 12 months ago averaged 15.5%, which is up from 14.2% in September 2007.

John Heron, Paragon’s director of mortgages, said: “There is solid and growing demand for decent, affordable rented homes in all parts of the country, but it is essential landlords purchase the type of property that meets tenants’ needs and expectations. These figures show that professional landlords are continuing to invest in the types of property where there is strong and sustainable tenant demand.”

There is strong growth in demand for rented accommodation from immigrants to the UK, with the Government’s recent announcement that 300,000 more foreign migrants have arrived in this country than had previously been announced.

Heron said: “Whilst we may be entering a period of slower homebuying activity, the underlying demand for homes continues to grow as the UK population swells, new households are formed and the population gets older.

“There is a combination of factors at work. People choose to wait before they purchase and stay in rented accommodation for longer. Inward migrants create extra demand for rented homes. With 1.2m foreign migrants having settled in this country since 1997, we estimate that several hundred thousand new renting households have been created in just 10 years - that’s a lot of extra demand. Landlords continue to invest, which explains why buy-to-let lending has held up well, according to latest reports from the Council of Mortgage Lenders (CML).”