Well you will see more and more sub prime losses coming out of the woodwork soon. Today for example:
http://news.bbc.co.uk/1/hi/business/7095809.stm

I work in the financial industry too (Hedge Fund). It is true that contagion is less now. Emerging markets are a good example. However I do believe that the US is now the biggest contagion risk (which is not priced in the US stocks' valuations) and the UK is probably a lot more at risk than other countries.

This year I have decided to fix the mortgage at a rate I am confortable with for the next 10 years. That way I know what we will be paying each month for the next 10 years. If rates go up we are safe, if they go down, well never mind we know we can afford the payments. Now we do not have to worry about what the future holds. It is now all budgeted for, with monthly overpayments to hopefully leave us mortgage free in 10 years time in our early forties. When we bought our house we were lucky to find a decent 3 bedroom in HOP for a price we could afford and we avoided stretching ourselves. We bought it as a home we could grow into for decades, not an investment, not a pension fund. Funnily our neighbours have been in our block of houses for decades too and after 2 years of living there, we know their name, speak weekly if not almost daily (in the summer especially) and socialise together. This is our home and I hope we won't have to move away from HOP. You only get money for your house once you have to sell it. So all the people excited or worried about house prices should only worry about them if they need to sell. Regarding the first time buyers: I come from a country where most people rent anyway and it still baffles me to see how obsessed this country is with owning your own home. Of course it is nice but getting out of spiralling debt and not overstreching yourself (even if that means having to rent) is far healthier for the country's economy in general (cue: look what happens when people who cannot afford a house get on the sub prime bang wagon!)