Average yields rose to 6.4% in the three months to the end of June, up slightly from the 6.2% average in the first quarter of the year, according to a survey of experienced landlords by Paragon Mortgages.
Although it is not a huge increase it is the second quarter of growth and ends a lengthy period of stagnation, the report points out.
It is also a sign of growing confidence in the buy to let property sector. The report also showed that 30% of respondents predicted that tenant demand will continue to increase over the next 12 months, while 50% expected demand to stablise.
'A lack of available mortgage finance makes it difficult for potential homeowners to purchase property and many people remain unwilling to commit to purchasing a home in the current house price environment,' said Paragon Mortgages' managing director, John Heron.
The study also suggests that the market is being bolstered by strong demand from stalwarts of the private rented sector, such as students, migrant workers and young, mobile professionals.
Heron therefore believes that strong yield levels will continue to attract buy-to-let investors, particularly as interest rates for savers remain low and the stock market remains volatile.
Meanwhile the National Landlords Association, the leading representative body for private residential landlords in the UK, has reminded companies and landlords in the sale and rent back market that only a few days remain for them to apply for FSA permission to keep operating.
From 1 July 2009, SRB landlords and companies have had one month to submit a complete application for interim permission to continue their SRB business activities. Under the new rules, SRB will become a regulated activity and applicants will have to demonstrate they meet minimum standards and are 'fit and proper' persons.
