Rental yields are stable as weakness in the main housing market softens conditions for landlords.

Figures from the Royal Institution of Chartered Surveyors (Rics) earlier this month have revealed that tenant demand for rented property is at record levels, with total annual returns averaging 10.3 per cent - up from 9.4 per cent three months ago.

Nigel Terrington, chief executive of mortgage lender Paragon, said: "Activity in the securitisation and whole loan markets has been muted over the summer and, when investors return in force, credit quality will be top of their agenda.

"Given the superior, indeed exemplary, credit profile of buy-to-let, we can expect them to favour paper backed by low risk mortgage assets originated by specialist lenders such as Paragon."

Increasing tenant demand is being fuelled by the uncertain and weakening general housing market, with many potential buyers turning to renting instead as they are unable or unwilling to commit to a mortgage to buy a house.

Landlords are continuing to buy, with overall returns steady.