If you invest in the stock markets and recently you’ve had to check your portfolio with a stiff drink, at least you’re not alone. According to the FT:

Stock markets finished their worst quarter in more than five years on Monday with further losses as investors continued to favour less risky assets.

The losses have seen many equity markets enter bear market territory – a fall of 20 per cent from recent peaks – over the last three months as a result of deepening fears about a US recession and continued tensions in credit markets.

For the UK’s FTSE 100, the S&P 500 index in the US and the pan-European FTSE Eurofirst 300, this was the worst quarterly performance since the third quarter of 2002, when accounting scandals at Enron and WorldCom sparked a global equity sell-off.

Of course, if you’re buying shares for the long-term than this is good news, although I agree it doesn’t always feel like it. Cheaper is better, remember?

In particular, Japan now looks seriously under-valued. The Nikkei 225 Average lost 2.3 per cent on the day, and finished at 12,525.54, down 17.4 per cent on the quarter. It was up at 18,000 just a year or two ago, and around 40,000 at its late 1980s peak.

The trouble with Japan is companies pay very low dividends, which makes it impossible to construct a dividend-based portfolio. This means you have to sit around hoping the index goes up again, with no income in-between. An expensive waste of time, recently.

Ireland is falling. The US is plunging. After 15 years of house price growth and five years of house price bubble, is the UK housing market aksi turning downwards? Will Elvis finally be spotted on the moon?

Prices are certainly stalling, with a drop of 0.4% in London last month according to the Land Registry. Not much after the stupid and socially divisive rises of recent years, but a start for those who’ve been astonished by their resilience.

Property indices never plunge suddenly in the UK; in previous downturns at least, they’ve more been chipped away at, like rental tenants wearing down a once-pristine buy-to-let flat. If prices do fall substantially, it’ll be through 0.5-1% a years (and with some positive months), not via a quick plunge back to sanity levels. (If you want to see the last five year crash in slow motion for yourself, you can download full house price data going back decades from HBOS.)

What’s more significant I think than the slight price wobble is that mortgage lending is being reigned in. If a banker is somebody who will lend you an umbrella when it’s sunny and then ask for it back when it rains, our banks see a monsoon ahead.

Now, a reduction in mortgage lending has previously been a great indicator of UK house price falls. But previously, such as in the late ’80s crash, that’s been because demand has dropped as people don’t want to buy houses any more. This time, mortgage supply is being constrained by banks trying to cut back on lending, either because of the risk or because of a lack of finance, even as they’re overrun by new customers who would have previously gone to the effectively neutered Northern Rock. So who knows how it will play out.

A further interesting new bear point concerns remortgaging. Nobody thinks about this in normal times as anything other than a formality and a chance to cut costs. But this time around, some buyers coming off very keen fixed or discount rate deals who have little cash are finding they are unattractive to the lenders offering lower rates. As a result, the rate they can remortgage is a sharp step upwards.

In extreme cases, the more unappealing mortgage holders might struggle to find a mortgage at all, or at least not one without punitive and unaffordable interest payments, which would then mean they’d have to sell their homes at the prevailing market price.

You don’t need to be the Governor of the Bank of England for the words ‘vicious circle’ to spring to mind.

House price falls are now the consensus view

When even an estate agent starts predicting 15% falls, we’re in new territory. After years of calling the market wrong and looking like a Wally (it was a word fashionable back when I first turned bearish on property… ok, slight exaggeration!) I’m wary of putting my cojones on the line, even now. But it really does look like the fat lady might be loosening up for a bit of shrieking.

How far will they fall? By my reckoning London house prices are 40-50% overvalued. Nominal falls might be partially masked by inflation over a period of years, but 25% or so lower from here by the time we reach the trough would seem entirely possible.

A quick update to my post of last week discussing Zopa rates rising because of the credit crisis. Rates have now come down – my main lending offer to A* customers is now out of the ‘Zone of Possible Agreement’ (ZOPA), which in English means people can get such better rates from other Zopa lenders that they’re unlikely to call on my money.

I would have to drop my rates down to around 8.25% to re-enter the ZOPA, which I’ve decided not to do for now. In these riskier times, I want some extra security from this sort of peer-to-peer lending, so I’m going to leave my money offered at that current rate and hope for another cut in supply in the weeks ahead.

Zopa sensibly pays you an okay interest rate on money sitting in your account, so you don’t have to rush. It’s a lot less than what I could get from actual Zopa borrowers, but this isn’t the time for hasty moves I feel.

So there you go. Gold has fallen, the stock market is up, and Zopa is possibly signaling the credit crisis is abating. It’s certainly proving an interesting new barometer to keep an eye on.

Apparently there’s still £30 up for grabs through Zopa’s affiliate scheme for new members, but do check if you decide to sign up, as the small print would seem to contradict this. If anyone from Zopa is reading, you might like to update those details?