Homeowner psychology is often perverse: the conviction that property prices can only ever appreciate seems to be accompanied by the ever-present fear of an imminent downturn. The latest focus of this anxiety is turbulence in the US property market, where low-income American home-buyers are suffering a rash of repossessions as house prices slide and mortgage repayments soar.

If a decline in consumer confidence results from this so-called “sub-prime catastrophe” and Americans stay away from their favourite hangout — the mall — then the effects will be felt in our economy, with consequences for our housing market. Or at least, that is what the doom-mongers are saying, so feeding the apprehension that a slump is just around the corner.

But before we assess this view, let’s pause to consider the plight of those now former homeowners in the US, crudely deemed “sub-prime” because they were less creditworthy. Many came from minorities and other groups who would conventionally find it difficult to borrow money. They were offered low-start loans by the banks, which sometimes did not even ask for proof of income.

For a time, the sub-prime borrowers were able to indulge in a risky financial balancing act. When property prices were soaring, they could raise quick cash from their homes; but as prices fell, this option disappeared. The loans — in particular those known as adjustable rate mortgages (ARM) — proved toxic. These allow borrowers to repay only a tiny amount of their debt each month; the rest is rolled up into the loan balance. But once this hits a certain level, repayments soar. Who could stand an increase from $1,600 (£824) to $4,600 (£2,368) a month on a $500,000 loan?

Their woes have become UK homeowners’ concerns thanks to recent stock market turbulence. This was due, in part, to worries over sub-prime specialist banks. Our very own Barclays and HSBC have been affected as a result of deals done by their US subsidiaries.

Sympathy for these borrowersis appropriate: they were led to believe that being an owner-occupier was a cinch. But it is also possible to overplay the significance of their predicament. For one thing, the US sub-prime mortgage sector accounts for $1 trillion of the whole $8 trillion market; delinquency rates in the “prime” sector remain low, for the moment.

In Britain, less creditworthy borrowers can also get mortgages. But our property market’s conditions are different; the boom continues in many places, with the £1 million home now almost a commonplace. Knight Frank, the estate agents, report a 31 per cent annual rise in Belgravia and Chelsea as oligarchs and hedge-fund managers outbid each other for examples of white-stuccoed perfection.

A shortage of homes for sale is keeping values aloft in these prime metropolitan postcodes, and also in towns such as St Albans and Winchester, within commutable distance of the capital. Indeed, a lack of property is a more general problem: we apparently need 200,000 new homes each year but are building far fewer. America has a glut of properties in some areas, which is one factor that is depressing values.

Some cooling in the UK market’s overall temperature is now evident after recent interest-rate increases, but most commentators do not see this widely forecast slowing as a prelude to anything more serious. Prices are predicted to grow at about 4-7 per cent this year, against 10 per cent in 2006.

The purpose of the interest rate rises has been to quash some of the market’s overexuberance, but also to curb inflation. As Fionnuala Earley, chief economist at Nationwide, explains, if a slackening in US consumer confidence started to affect our economy, this would lessen inflationary pressures. The Bank of England would then be inclined to cut rates, so easing any potential damage to house prices.

But just because the sub-prime tragedy should not strike terror into our hearts, that does not mean it holds no lessons. We should pause to consider how much debt we have, how we intend to repay it and never assume that property prices can only ever go remorselessly upwards.

Keenly priced buy-to-let loans are urging more and more people to acquire property for their pensions; these investors are expected to snap up any homes put up for sale by borrowers who were already overextended before rates were hoisted. Yet no-one should ever rely entirely on bricks and mortar for their retirement.

Interest-only mortgages (where no capital is paid back) are also increasingly popular, yet few people give any thought to how they will repay the capital outstanding in 25 years’ time. Maybe this is the prime time to do so.

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