Leeroy, the suggestions offered seem reasonable and backed by experience and knowledge. No disrespect to any of the guys who've responded but if I were you I would make sure are legally protected by speaking to an IFA. That may give you a more solid platform to jump off from.
As Sarnie and others have explained there's quite a lot to consider here. Renting out your current place may be a good solution and for some people it works well. However you also have to be aware of circumstances outside your own environment.
If we do get a double dip, the Feds decision to pump $600 billion in to the US economy worries me a little, that may have a knock on here, we have signs of inflation already. Hopefully you will stay in employment but what if you don't? What if your tennants lose their jobs, or what if your property is unrented for a couple of months, will you be able to cover the costs? Don't forget you'll need to have some kind of repayment vehicle for that IO mortgage.
I don't want to be a doom monger but these things need to be considered. If you're going to rent out you have to consider the competition in the local market, research in to your competition is the key. Also remember a house is only worth what someone will pay for it. If it's £300,000 this year what will it be next year....£400,000 or £200,000? With a reported 490,000 public sector job lossess coming in to effect over the next few years. With the delayed shock waves of the banking crisis still being felt across the world (Gold prices still rocketing, governments buying their own gilts etc) nothing is certain
Research and professional advice is what I would suggest.
Best of luck