Recent figures released by the Essential Information Group (EIG), the recognised authority for data on UK property auctions, revealed that the average rental yield for property bought at auction in March 2009 was 9.02%. In contrast, the average savings rate on an instant access bank account now stands in the region of 1.01% AER.

This means that someone with £100,000 in the bank currently earns an average of £1,010 a year gross interest, but if they put the money in property they could enjoy a return of £9,020 a year in rental income.

David Sandeman, managing director of EIG, said: “We’ve recently seen a divergence between AST yields and savings rates. AST yields have gone north of 8% whilst savings rates have plummeted, and the cost of borrowing to fund an investment property is also coming down. Anyone who derives their income from interest on savings is therefore much better off putting the money into bricks and mortar.”

According to Chris Baguley, director of specialist lender Auction Finance Limited, ongoing rate cuts mean traditional savings accounts are not performing to the level many would like.

He said: “However, the same cuts also mean long term mortgage finance has become more affordable for those who can secure it. This makes it much easier to service the mortgage repayments on an investment property out of the rental yield. Those with sufficient capital to invest may well be able to pocket a decent proportion of the rental return for themselves, and we’re seeing more and more people crowding the auction rooms to put their savings into property.”