The latest Buy-to-Let Index from Paragon Mortgages reveals that UK investors in the north continue to benefit from higher average returns than those in the south of the country.

In Yorkshire, average returns according to Paragon are 57.8%, while in the North West they are 44.0% and in the East Midlands 39.3%. The North stands at 28.1%. These figures compare with an average for the country as a whole of 18.7%

John Heron, managing director of Paragon Mortgages, said: "As property values in northern areas have generally held up better than those in southern parts, so overall returns have remained stronger. Yorkshire, for example, has had an almost uninterrupted trend of rising house prices over the past 12 months, while the North West has seen increases in 9 out of 12 months."

Mr Heron continues: "This month's figures show a distinct north-south divide. Total returns, property values and yields are mostly higher in northern regions, most notably Yorkshire, while southern regions continue to see lower property values and yields. Having said that, confidence among landlords remains sound and they continue to be cautious buyers as and when they identify suitable properties that meet tenant demand."

Returns from commercial property are set to slow sharply in 2006 following a robust commercial property market this year, according to the Royal Institute of Chartered Surveyors (Rics).

Due to huge investor demand, the UK commercial property has performed extremely well in recent years. But while investor demand for commercial property is set to hold steady, it will not be sufficient to prevent a slowdown in overall returns, warns RICS. Last year total returns soared to 18.3%, while Rics predicts returns will drop to 13.4% this year before falling to 6.6% in 2006.

A Rics spokesperson said: "We expect investment demand to remain firm in 2005, with rising capital values continuing to attract investor money into the asset class. The growth in capital values will slow however, as rising interest rates and perhaps modest strength in the equity market reduce the relative attraction of commercial property. We expect capital values to stabilise in the first half of 2006 as commercial property yields bottom out and then edge higher."

Prompted by increasing tenant demand and service sector employment growth, investment in UK commercial property is expected to produce a total return of 11.9% this year - up from the previous estimate of 10.5%. That is according to a new report released by Scottish Widows Investment Partnership (SWIP).

However, commercial property is set to offer a slightly lower return over the four years after 2005, with returns expected to come in at an average of 7% per year, according to the unit's property research manager Stewart Crowe. He also claims that the office sector should prove the best form of property investment.

He says: "Tenant demand picked up in 2004 in an increasing number of office markets and rental growth is forecast to increase over the coming years. Property has performed strongly as an investment sector in recent years, stirring renewed interest from pension funds burned by the end of the dotcom equity boom."

Mortgage applications at Bank of Ireland are up 25% on last year, the bank has announced.

The bank's figures also reveal that the age of first-time buyers is decreasing with the average age now at 32, down from 35 in 1990.

"The trend reflects the strengthened purchasing power of first-time buyers as a result of strong wage inflation, reductions in interest rates and stamp duty obligations," said a spokesperson for the bank.

Commercial property lending up

Commercial property lending rose by 29% last year, compared to 2003, according to a Bank of England-sponsored annual survey, by De Montfort University in Leicester.

British and foreign banks and building societies increased their outstanding loans to the sector by 13% to a total of just over £129 billion.