THE USA is facing a slump in house prices caused by poorer home buyers defaulting on their "sub prime" mortgages. These are home loans, normally at a higher-than-usual rate of interest, given to purchasers with a bad credit record.

As prices slip down and personal equity in the property drops, then the temptation for these borrowers to walk away from the debt and hand in the keys becomes a logical decision – especially for those who already have a bad credit rating which cannot be wrecked by repossession.

With interest rates rising and the sources of easy mortgages drying up, or in some cases going bust, there may be a huge pool of prospective buyers in America but if no-one wants to lend them money they cannot buy and the market slips further.

Add to this the easy availability of building land and rapid American construction techniques and you have an oversupply with insufficient demand – a complete reverse of our present situation here.

All this nervousness has spilt over into our stock markets but not – at least at the time of writing – into our property market which remains ever robust and increasingly expensive despite promises of "affordable" homes to come.

But we, too, have our sub prime mortgage market which has enlarged enormously over the last 10 years and forced many of the High Street lenders to ease their formerly strict lending criteria.

The once rare "non status" mortgage has become a common way for lenders to turn a blind eye to whether a borrower can really afford the payments.

Both lender and borrower are shielded by a rising market as the value of the house normally covers the loan and any arrears if the house has to be sold, but when prices are falling it’s a different story.

In the UK market we now have many buy-to-let investors and if negative equity occurs these will be the first to accept repossession as a business decision as, unlike the locked-in owner occupier, they won’t need this roof over their head.

But this is a "worst possible case" scenario which is unlikely to occur. There will be no crash here as, despite the holiday period, our offices are reporting huge numbers of buyers chasing too few houses for sale and our mortgage providers still have plenty of money to lend to the right customers.

* Ron Kennor is general manager of Robinson Jackson Estate Agencies on 020 8316 6200.