According to Fitch Ratings, the UK is second to France when it comes to an overvalued housing market. In addition, the UK’s economy is one of the most at risk from rising interest rates, incomes and asset prices.

Overvalued property and highly indebted consumers makes the UK economy especially vulnerable. According to Fitch, house prices are high compared with their long-run trend with household incomes and with rents. UK house prices have risen more in the past 10 years than in any other nation studied, except for Ireland.

Brian Coulton of Fitch said: “Nominal housing yields are now lower than bond yields.”

According to Coulton, many countries have seen rapid growth in house prices after central banks cut rates during the global slowdown that started in 2001. He said: “Monetary easing earlier in the decade did pump up the housing market. But with five interest rate increases since August last year, I do not expect that to continue in the UK.”