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Blind ratings- Sweden rated AAA even when it has a housing bubble

Nobel Prize laureate and economist Paul Krugman has chimed in, saying
Sweden probably has a significant housing bubble.
Olaser | istock/360 | Getty Images
Johan and Alejandra are the kind of Swedes the IMF has been warning about - piling up debt to keep up with an ever-rising property market and fund a lifestyle of travel, maids and nights out.
The couple plan to buy a flat in Stockholm for 5 to 6 million Swedish crowns ($724,000 to $869,000), initially with an interest-only bank loan, among other spending plans.
"I may travel, I may want to invest in a new business," said Alejandra, who runs a cafe in the city centre.
Less than a month away from a general election, there are no votes in campaigning to stop the credit flowing, but there are fears that such Swedes could be the Achilles heel of a country that boasts a coveted AAA score from credit rating agencies Fitch and S&P.
Four in 10 mortgage borrowers in Sweden are not paying off their debt, and those that are repaying the principal do so at a rate that would on average take nearly a century.
Swedish property prices have nearly tripled in just two decades. In July, home prices rose at a double-digit pace from a year ago - the first time in more than four years.
The IMF has warned financial instability in Sweden is an increasing concern and urged a comprehensive set of macroprudential measures to temper soaring mortgage debt. Nobel Prize laureate and economist Paul Krugman has chimed in, saying
Sweden probably has a significant housing bubble.
Ref http://www.cnbc.com/id/101942770

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