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Fitch Maintains UK’s AA+ Rating Due to Housing Risks

There have been fresh warnings about the housing market after the ratings agency Fitch kept the UK below its top credit score.

The UK lost its coveted AAA rating last year and in an update on Friday, Fitch said it was keeping the country on AA+. The ratings agency said the banking sector was in better shape and economic growth was solid but the deficit was still too high and there were growing risks around an increasingly hot housing market, particularly in London.

The warning came just hours after the chancellor, George Osborne, announced he was giving the Bank of England sweeping powers to control the size of mortgages.

The Fitch update said: “Recent rapid increase in the house price-to-income ratio, in particular in London, could lead to excessive leverage if supported by unsustainable lending practices. If unchecked over the longer term, this would increase macroeconomic risks and could also have a knock-on impact on the sovereign’s fiscal position.”

The agency highlighted “favourable macroeconomic trends, including strong GDP growth, falling unemployment and inflation close to the 2% target” and said growth was the “least volatile among the major advanced economies”. But it said Britain’s deficit remained too large to allow an upgrade to the top credit rating.

via The Guardian [1]

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Alfonso Esparza

Alfonso Esparza [6]

Senior Currency Analyst at Market Pulse [7]
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza