The firm's buy-to-let index for January showed that rents have risen at their fastest rate on record, clocking up an 8 per cent increase in the last quarter of 2007 alone.
The fall in consumer confidence across the buying and selling markets has impacted positively on the rental sector.
As a result, tenants are now paying £965 per month on average - an jump from the £808 reported a year ago.
Yields held steady at 6 per cent for the five-months to December, however the final month of 2007 saw this figure boosted to 6.2 per cent.
John Heron, managing director of Paragon Mortgages, said: "Recent statistics provide solid evidence from the sharp end that landlords remain confident about the long-term prospects of residential property investment.
"Buy-to-let has certain counter-cyclical characteristics which mean it will remain resilient, and indeed will outperform the market, at times of lower economic confidence and growth.”
