Economy Showing Strength but Yields Rating less than Top Notch
The UK economy is showing strength in areas and a few weaknesses but overall is fundamentally strong. These sentiments are the highlights of the latest Fitch rating for the recovering economy. Inflation remains low as well as unemployment, but a high amount of debt coupled with a potentially strong housing market is keeping the current AA+ rating intact from Fitch. This is one step below the top rating of AAA, which the UK economy boasted for many years.
This lower rating has been issued just hours after Chancellor Osborne announced the Central Bank would be given higher powers to control the size of mortgages for property in the UK.
Comments from the Fitch update include: "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 deficit in England remains too large for the rating to be higher. Although the inflation rate is right where it should be at close to the target rate of 2%.
Although the UK is now facing the issue of a hot housing market, other issues within housing are giving the country fits not only now but could in the future as well. High demand is creating an imbalance which could spell trouble in the future. Many seeking housing in the coming years are likely to be left in the cold with nowhere to go.