Some of our readers declared that they were terrified at the concept of offering that much less for a property they wanted. Well, in the near term the answer is, unless you do, you’re going to lose money .. a lot of money.

An approach suggested by some other readers is to beat the estate agents at their own game. Simply, you get some of your friends to sign up with the same estate agents as yourself and they put in the offers at a lower value than you intend to. In recent weeks many estate agents are so short of orders going through the books that they themselves become your best friends prompting the seller to accept much lower (quote – ‘realistic’) offers.

There have been anecdotal reports that this is happening in some parts of London where small groups of city workers have clubbed together to drive prices down to more realistic affordable levels.

It’s clear that such action would be illegal if applied to the stock market or commodity supplies as these cartels often form to attempt to distort markets. However, the housing market is a highly unregulated environment and anyone who has sold or bought a house in the past will be only too familiar with estate agents tactics of ‘talking up’ markets. Clearly it’s now the turn of the buyer to name a price.

As ever our advice is to look at the peak value of properties in the area (October 2007) and offer no more than 70 percent of that value if you wan to be sure of a reasonable starting point for a house – of course you should then barter down.

Halifax announced that it would require future borrowers to first set up an account with them and save for a few months before they’ll even be considered for a loan – good reason is that Halifax currently offers the best deals on the market. This is a return to the old days before the roaring eighties when you’d have to show your ability to maintain payments and build up a little cash reserve to contribute into your house. Cynics will say that this was because most lenders were mutuals, so they could only get the money from savings and not the market. But thinking back to the dim distant past it is clear that the main reason was that one had to prove ones-self to the local branch manager first.

At the same time the papers where full of various forecasts about how far the housing market has to fall, and how quickly – ranging from 15 percent through to an unlikely 50 percent, the same papers then went on to present proud buyers who’d managed to get 10 percent reductions in the asking price – 10 percent – now let’s think about this. If I borrowed $1m off you and said I’d give you back $850,000 at the end of the year what would your reaction be? Of course .. so it got us wondering, was this person proud of being foolish enough to probably lose money? Why would the papers present this as a success? In our title we given the analogy of catching a falling dagger, perhaps that’s more representative of the reality.

We’ve decided to launch an interesting experiment – instead of advising people to hold off buying a house (there are many reasons one may really need to move or buy a house) we’ve suggested that they act with courage and sense. If the prices are going to drop say 20 percent then offer 20 percent off the average price. Doing this is easy – in the UK go to upmystreet.com enter the post code and offer 20 percent less.

The idea has been catching on at the dinner party scene in London recently with people proudly boasting that the estate agents (realtors) have gone pale faced at the offers. A year or two ago they wouldn’t have ignored such an offer, but today they are desperate to move housing stock (150 realtors a month going bust in the UK), so begrudgingly they pass the offers on.

Whilst this is anecdotal it led us to wondering if the so called ‘soft landing’ was in the process of bursting a tyre and going horribly wrong.

The government is doing its best to talk down any suggestion that there is a problem, that perhaps the bubble has burst – which in our cynical mindset means that things may be worse than we imagined.

We’ve got some strong advice to anyone considering buying a house in the UK at the moment – in order to build in some buffer for that dream house we suggest that you seriously offer at least 25 percent less than the current realtors valuation – chances are that if it get sold to someone else, you’ll be able to knock on the door end of this year and they’ll be happy to sell at any price.

With an astounding example of inappropriate timing, the UK’s Council of Mortgage Lenders (CML) yesterday announced that the equity release sector should be encouraged to grow by the government. 

Equity release schemes are designed to homeowners to release cash from the current value of their property – in other words equity release is a mechanism by which you can trade any gain from property prices for more debt.

Now, we weren’t sure we read this correctly, but it seems that the CML is actually encouraging more people to take on extra debt – this at a time when the financial markets are in turmoil, credit is impossible to get hold of and the threat of a house price collapse hangs like the sword of damocles over the overinflated UK housing market.So what are they thinking – well the clue is in the fact that mortgages have all but dried up and lenders are desperate to find outlets to make margin on loans.

So what better than to bring back the age old idea of getting the old, weak and vulnerable to raise cash by effectively selling off part of their homes. Anyone who remembers the early nineties will remember that such schemes abounded at the time, eventually backfiring on the borrowers as interest rates shot up and the borrowers found themselves unable to pay off debts and eventually evicted from homes they had spent most of their lives paying off. It’s a wonder that such schemes haven’t been outlawed or at least strict guidelines attached – and yet here we see the CML actually asking the government to encourage such schemes.

Our view – someone at the CML should stand up for responsible, prudent lending – clearly the CML is a lending body that has its head in the sand – the words ‘crisis, what crisis?’  come to mind. 

All eyes at the bourses in Europe will be on Santander on Monday morning. With confidence in the banking sector at all time low it seems that the Spanish bank has slipped up badly by allowing its British owned Abbey to offer an insane portfolio of mortgage offerings.

 Sometimes you just know that there’s going to be trouble, sometimes you wake up, read the papers and think ‘are they serious?’. Sunday morning, the British public woke up to headlines with lunacy, unbelievable and crazy in them. Yes, despite images of middle class brits lining up to withdraw their savings from Northern Rock, despite the melt down in sub-prime lending in the USA – Abbey has announced that it will start to offer 125% loans to mortgage borrowers.

There – we thought we’d mis-read, we thought it was a typo – but no – in these times of concern worry and crisis – Santander actually believes that offering 125% mortgage loans is a good idea.

 The Abbey was one of the UK’s original big four building societies, until it demutualised and was eventually snapped up by Santander in 2004. Since the original fuss about Abbey going to a Spanish company and being quoted on the Spanish exchange, not the British there has been some, though not too much, disquiet about what protection the Spanish would offer British savers.

 Well – it seems that the time has come – on Monday morning we expect a trickle of withdrawals from the bank as people start to worry that Abbey has lost it sense of reality. By Tuesday the papers will have picked up on the story and by Wednesday Abbey will start seeing the same lines outside its branches as Northern Rock, all at the time that the Spanish government is drawn into assuring savers that their money is safe.

Our advise to to Santander shareholders (and many are British pensioners) is to very carefully consider your positions with Santander and be very aware of what happened to Northern Rocks share price.