Buying to let yourself in for disaster?

If you listen to mortgage lenders and estate agents, everything in the housing market is rosy. Despite fast-rising prices in some areas, fed presumably by easy access to mortgages, the housing professionals believe there is scant risk that buyers are riding for a fall.

Certainly, if interest rates really do stay low, or lowish, borrowers who stretch themselves to meet the demands of rising prices are at lower risk than people who did the same in the Eighties. As for the price of their properties, that's another matter. As The Observer has pointed out, prices in London are being propelled forward by the booming buy-to-let market. If there is careless lending, this is where it will be.

There are rumours that some mortgage companies are paying scant attention to their borrowers' means to repay their buy-to-let loans. If borrowers in this market are over-extended they will be vulnerable if interest rates rise, or if they simply cannot rent out their properties. Forced sales could prick the price bubble.

The Financial Services Authority, as regulator of banks and building societies, should be taking a close look at how lenders are behaving.

The authority's concern here would be to ensure lenders are not taking too much risk with irresponsible lending.

In its other role as watchdog for investors, the authority has no power at present to see that the enthusiasm of amateur landlords for buy-to-let as an investment is tempered with impartial advice. If disaster unfolds in the buy-to-let market, it will be hard for the Government to ignore calls for mortgages to be included in the Financial Services Act.

After the many financial mis-selling scandals, it is almost impossible to believe that companies are still up to their old tricks. Alarm bells are ringing over sales of income drawdown plans, investment schemes designed as an alternative to poor-paying annuities for people cashing in personal pensions. Drawdown plans leave funds invested in the stock market, and the pensioner draws an income from the dividends.

After visits to firms in this market, the FSA is concerned that records of sales to drawdown clients are not as full as they should be. Record keeping is not evidence necessarily of poor selling but, as the FSA says, it can be a sign that all is not as it should be. People coming up to retirement are desperately concerned about the poor returns from annuities. But lest a salesman extol the virtues of drawdown to you as an alternative, note that the rule of thumb is that they are inadvisable for people with a pension fund of less than ?250,000, unless they have substantial additional assets.