The ongoing effects of the credit crunch are having a huge impact on many peoples financial situation at the present time and it looks as though the trend is likely to continue for some time to come yet.

With the Mortgage and loan markets remaining reasonably stagnant, it seems there are no competitive cheap loan deals available, particularly for those borrowers who are reaching the end of their cheap fixed rate mortgage and this, coupled with the rising cost of living, high rate of inflation and job insecurity, is leaving many individuals in the difficult position of not being able to keep up with the repayments on their mortgage.

One solution to the problem, other than to downsize or take on a second job, is to rent out a spare room in the house. To many home owners, there could be nothing worse than having a stranger living under the same roof as them, but as the demand for rental property continues to increase, along with the cost of their homeowner loan, many people are starting to do just that in order to avoid their loan going into arrears or even defaulting and having someone else living in the house is certainly a better option than the bailiffs knocking on the front door. Most banks and building societies are likely to welcome this course of action, rather than see the loan enter an arrears situation.

According to the Abbey, the average rent generated from a room is £289 per month, creating an additional annual income for a home owner of £3,468. As an additional bonus, this is likely to be tax free income, as the Government offers a tax free allowance of £4,250 per annum through rental income.

It may not be everybody’s cup of tea, but for those individuals who have more money going out each month than they have coming in, renting a room out could be the ideal solution to remain in the black.