Time for house buyers to drive a hard bargain

David Kuo, Head of Personal Finance at money website Fool.co.uk, says: "Average house prices have fallen again according to Halifax. The 2.4% monthly reduction in May to £184,111 marks the fourth month in a row that the value of a typical home in the UK has dropped.

"However, there is still a gulf between the price of a typical home and the average size of an approved mortgage. According to the Bank of England, 58,000 mortgages for a total of £8.3 billion were agreed in April. This implies the average mortgage taken out was £143,103.

"So, in order to afford the typical home, buyers have to finance the 22% difference of £41,008. This may either be through any equity they have built up in their existing property or from savings put aside for a deposit.

"But there is a third way. With house prices predicted to fall 20% this year, the typical home will cost around £160k in December, according to Fool.co.uk. Consequently, buyers are now in a strong position to drive a hard bargain.

"Over the last decade, house buyers have had to dance to the tune of sellers as house prices rose. However, in a buyer's market, it is he who pays the piper that calls the tune. Every £10,000 that you can slash from the asking price will shave £64 a month off your monthly repayments. This equates to over £19,000 on a 25-year repayment mortgage.

"But even though the tables have turned, buyers still need to tread carefully. Negotiations are all about win-win, even if the shoe is on the other foot."