While landlords have been worried about the threat of a rise in capital gains tax from the new government, they can at least console themselves with the twin facts that rents are rising and, for the time being at least, mortgage rates are remaining low.

The average rent in the UK rose by 0.5per cent to £667 per month in May, according to the latest Buy-to-Let Index from LSL Property Services, which owns estate agents Your Move and Reeds Rains. In London, the increase was double that at one per cent, making the average monthly rent in the capital £924.

Yields on buy-to-let properties have remained at their highest level since
December at 4.8 per cent, as rents accelerated faster than house prices. The house price for the average rental property rose by just 0.1 per cent compared with April, and registered an annual increase of 8.6 per cent.

David Brown, commercial director of LSL said: “House price increases have steadied, and rental income is now accounting for an increasing portion of a landlord’s total return. Rents have continued their upwards climb and are just £21 short of their all-time high.”

These figures coincide with another report that suggests mortgage borrowers are not taking full advantage of low interest rates to overpay their mortgage. This is one of the most tax-efficient ways of saving, particularly at a time when deposit accounts are paying so little.

London landlords may well be cushioned from the worst of the austerity measures that Cameron & Co are bound to extend, as more people are expected to migrate to the capital in search of lucrative work. However, to protect themselves even further from pain, overpaying the mortgage is a very sound investment not only as a savings vehicle but also to build up the equity in your properties.

If times get hard, landlords with the smallest mortgages will be far better placed to cut the rent – if need be – to attract tenants.

Better still, landlords with the smallest mortgages and the largest amount of equity are able to take advantage of market opportunities. As David Brown says: “The fundamentals of sound property investment – tenant demand, yield and rental income – are in place for the buy-to-let recovery to continue.”

But there is one caveat: make sure you have enough of a contingency fund to cover urgent repairs or long void periods.