There are a lot of things to consider Hawkeye, and whilst BTL isn't as good was it was, it isn't a complete loss. I'm not sure your age or circumstances, nor how you view long term investments or risks, but if you consider it as a rising asset investment, then as long as you can cover your costs, then it can be better than the stock market, because you'll have a bigger asset value than just your deposit. If you want to travel, then you need to be making enough rent to cover the mortgage interest, any costs, and the letting agents fees, but if you want it as extra income, then forget it.
I bought a flat in London back in 89, for 116K, and then sold it 6 years later for 128K, and that was during a recession, but today, it's worth about 950K (God I wish I'd kept it). About 5 years later, I picked up a couple of flats for 25K each, and they're now worth about 100 each, but whilst it's taken 20 years to reach that, it's still been better than inflation. I have 4 properties that will continue giving me rent and are effectively a pension income, yet I can still pass them onto my daughter.
I had a endowment mortgage on the London flat, and fortunately, kept the endowment policy going when I sold the flat, so although it didn't grow as much as it should have, I'm going to be okay - just. But the other trick to consider, is adding the deposit to your pension. The government pay in at your highest tax rate (but they're dropping it soon, or may even have done so already), so you add £1000 to your pension, and the government add in £200, (or £400 for higher rate payers) and you can go back on 6 years worth of tax, plus the fact that it'll grow nicely, a 20% addition to your pension gratis from the government, is the best interest rate you'll ever get.
But if you can get the property under for 125K, and all the figures balance out, then I'd go for it.
