Average monthly rents have hit the £1,000 mark, providing buy to let landlords with a much-needed boost in the wake of the mortgage storm.

Rising demand for rental property has pushed many potential homebuyers out of the market, and driven average monthly rents up to £1,003.

According to buy to let lender Paragon, the average cost of renting a home has risen by 4 per cent since January 1, 2008 and by 12 per cent over the past six months.

It reported that one third of landlords believed tenant demand had risen rapidly in March, with 58 per cent stating that rental demand was both strong and stable.

The shift from new investors chasing capital growth to a more traditional view of buy to let as being based on rental income has raised doubts.

However critics have questioned whether this shift can sustain the strength the market has shown in recent years.

Rent increases and higher demand are appealing prospects to the majority of landlords, but Paragon's research highlighted the growing divide in the market.

Long-term buy to let owners found themselves in a good position, especially those who have seen rapid increases in house prices during their ownership and have relatively small mortgages. However, recent players in the buy to let market are at greater risk due to the current conditions.

This is reflected in Paragon's figures, which showed just 16 per cent of buy to let business came from people making their first landlord purchase, compared to 40 per cent in May, 2001.

The mortgage crunch, which effectively stopped Paragon itself from lending on new business, saw buy to let rates rise, lenders cut loan-to-value offers and arrangement fees on the best loans run into thousands.

Nigel Terrington, chief executive of Paragon, said, “There is still demand from new landlords to enter the market and opportunities remain for those investors, but professional landlords hold the majority of stock in the private rented sector and these larger scale investors account for the bulk of new transactions.

“Their landlords represent the core of the buy-to-let market – they are investors that base their purchase decisions on proven tenant demand for long-term returns rather than speculative investment for a quick profit.'

The average buy to let property is now worth £191,276 according to Paragon, which is an increase of 11.3 per cent compared to last year.