Westpac tips earlier rate hike, house price decline in late 2022

The team of forecasters has become the latest to bring forward its rate hike predictions following a surge in GDP growth. 

After updating its economic forecasts, the team, led by Michael Gordon, predict the OCR will rise from August next year, "with a gradual series of hikes at three or six-month intervals, reaching 2% by the end of 2024".

Previously, Westpac had predicted rates would be on hold until 2024.

Other banks including ANZ have predicted hikes as early as May. 

The Westpac team said it was encouraged by recent economic data, with business activity and retail spending data supporting the GDP growth numbers.

With higher interest rates coming down the track, Westpac has also upgraded its house price forecasts, "reflecting a stronger than expected starting point and a review of our modelling of mortgage rates".

"We still expect house price growth to cool significantly over the next year, in response to the recent changes to the tax treatment of property investors. However, we don’t expect prices to tip over into outright declines until late 2022, once OCR hikes are already under way," the bank team said.