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Pension Crisis And House Prices

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Hi long long time lurker here in need of the assistance of the financially literate board members. A thread on Motley fool pension board was discussing the fall in gilt yields wiping millions of the value of pension funds, this article in the FT suggests that this could impact on the housing market.


Quote:Ben Broadbent, economist at Goldman Sachs, says that super-low bond yields may over time cause the misallocation of capital - hurting small companies relative to large ones - and threaten economic stability. "The market favours investment in large companies, which have the access to securities such as bonds and equities, but the smaller companies grow faster. Pushing resour-ces into big, mature companies could, at the margin, slow down the growth of the economy."

He points out the extremely low level of bond yields threatens to push up other asset prices, including house prices. "Given the fall in yields, there is a big incentive to offer long-term mortgages, pushing the average rate of mortages lower, and subsequently pushing up house prices further."

I have no knowledge of stock market, gilts, bonds etc and would welcome the boards assessment and hopefully dismissal of this statement.

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      • down 5% +
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