People are continuing to invest in private rental properties, with the total annual return averaging 10.3%, a 1% rise in last three months, according to Paragon Mortgages’ Buy To Let Index.

Nigel Terrington, chief executive of Paragon Mortgages, said: “The current housing market is, in many respects, a positive signal for buy-to-let.

“Tenant demand remains buoyant and investors continue to invest”.

Five interest rate rises since August 2006, coupled with difficulties in the money markets which have pushed up borrowing costs for mortgage lenders, have resulted in many lenders tightening their lending criteria, making renting an attractive option for those who don’t want to risk buying in the current market conditions.

Buy to let investor Steve Chippendale said: “Following the recent rises in borrowing costs, owner-occupiers are understandably more reticent to purchase, which represents an excellent buying opportunity for buy-to-let landlords.

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“With a reasonable deposit and careful choice of property, buy-to-let can still make good economic sense, but you do need a long term viewpoint.”