Cameron Bagrie

PHOTO: Cameron Bagrie. Photo credit: The AM Show

A prominent economist has called for the Reserve Bank to consider putting restrictions on its upcoming funding for lending scheme, fearing yet another explosion in housing prices.

The scheme, expected to be revealed on Wednesday, will give banks a cheaper source of funding – rather than rely on deposits and private funding, they can access money from the central bank. In theory, this will allow them to lower interest rates without risking the loss of deposits from investors looking to turn a profit.

“The funding for lending programmes is all about lowering the average cost to banks, get their funding costs coming down,” economist Cameron Bagrie told The AM Show on Tuesday.

“The argument is if you can get the funding costs coming down, that’s going to make money available for banks to lend a little bit cheaper.”