The idea of just handing the keys back and walking away from a house worth less than the loan made against it tends to catch the imagination. Hence fears that the expiry of initial fixed rates on Alt-A loans could result in another wave of foreclosures, just as the pain in the sub-prime segment appears to be peaking.

Yet there are reasons for cautious optimism. Alt-A borrowers have better credit records than sub-prime debtors, and the pool of Alt-A mortgage backed securities is smaller - about $600bn for loans made between 2005 and 2007, compared with about $1000bn for sub-prime. Home owners will not necessarily default just because plummeting home prices have left them with negative equity. Research by the Boston Federal Reserve examining house price falls in the early 1990s found that while negative equity was a necessary condition of foreclosures, borrowers also had to run into cashflow difficulties before losing their homes.