Towns and cities with just one university provide the highest rental yields for landlords who serve students, a study by Paragon shows.

The lender’s research says that eight of the top 10 towns measured by this metric have a single main university, as do 14 in the top 20 towns.

Top of the list is Derby, home of the university of Derby, which earns an 8.67% yield, followed by Pontypridd, where the university of South Wales is located, at 8.31%.

The third town on the list houses favourite of General Melchett, university of Hull, which will see landlords pocket a yield of 8.12%, on average.

Paragon Bank mortgages managing director Richard Rowntree comments: “Although major cities like London, Birmingham and Manchester often boast the largest student populations, they are not necessarily the best locations for generating yields in the student buy-to-let market.

“This is because such places are more likely to be home to purpose-built student accommodation and greater levels of competition, whereas smaller cities and towns have less competition from large scale institutional investment.

“Something else we often see when looking at the best yielding student locations is relatively affordable property – the top five locations for yield have property valued below the national average of £278,000. Another common trend the top 10 yielding locations share is that they have smaller private rented sectors serving the student market.”