Until very recently, Britain’s attitude to the sub-prime meltdown in the US was: “It couldn’t happen here”. But worries are growing that echoes of the American experience could ripple across the Atlantic.

As two mortgage lenders, Unity Homeloans and Infinity Mortgages, announced yesterday that they were closing their sub-prime mortgage product range to all new business with immediate effect, Vince Cable, the Liberal Democrat Treasury spokesman, sounded the alarm over Britain’s culture of debt. “The stresses and strains now being seen in the USA and in Germany may well be felt in Britain before too long,” he said.

The cracks are starting to show. Last week the Council of Mortgage Lenders sharply revised up its estimate of home repossessions. The numbers are pretty low compared with the US, and are dwarfed by the experience of the early 1990s. What really got analysts nervous was the number of repossessions as a proportion of mortgage arrears. By the look of the CML’s data, nearly 40 per cent of mortgages in arrears now lead to repossessions, up from 12 per cent just three years ago. The figure is far higher than anything seen in the 1980s or 90s and suggests that sub-prime lending is a larger phenomenon than previously thought.

David Owen, of Dresdner Kleinwort, said: “Lenders in this area are not giving households who run into financial difficulties the luxury of several months grace. Think what could happen if house prices fell.”

However, house prices show little sign of falling. Unlike in the US, a squeeze on the supply of homes has underpinned prices. The massive levels of defaults on loans in the US are therefore less likely to come to Britain. In addition, the CML says that the wilder inventiveness of the US sub-prime mortgage originators never spread to the UK in the first place.

One man who remains sure that the problem is manageable is Mervyn King, the Governor of the Bank of England. This week he repeated that repossessions remained at a low level. The increase, he said, “doesn’t in and of itself at this stage constitute a major macroeconomic threat.”

But the absence, for now, of a large sub-prime problem in Britain does not mean that its stock market is immune to the problem. In fact, European banks such as HSBC and BNP have proved themselves markedly exposed to worthless mortgage-backed bonds and collateralised debt obligations.

Kevin Duffy, the managing director of Robert Sterling, the mortgage adviser, said: “We are seeing the contagion coming over from the Atlantic. The organisations lending that money in the US also have a stake-hold in the UK market so it is clearly going to have an impact. The question is also whether we are going to make it through the next few months without one of the big players withdrawing. That’s the $64 million question.”

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