Westpac's acting chief economist Michael Gordon said "a string of strong activity indicators", such as the soaring housing market, had defied restraining measures. This, he said, could lead to a tightening of monetary policy this year.
"Having just recently brought forward our forecast of the first OCR hike to August 2022, we’re now questioning whether the RBNZ has even that much time on its side. We now expect the first OCR hike to occur in November this year, with follow-ups in February and May next year, and a further gradual tightening over the following years."
Westpac's team expects the pace of OCR hikes to be gradual, with three month intervals followed by six monthly hikes.
Gordon noted the potential impact on new borrowers, particularly the new entrants to the housing market.
"As others have noted, households have taken on significantly more debt since the last time that interest rates rose, so a little could go a long way in terms of squeezing household budgets and dampening demand."
Meanwhile, ANZ's Sharon Zollner also joined the group of forecasters predicting a November rate hike.
"We have been emphasising for some time that the risks were becoming strongly skewed towards lift-off this year. Now that the market is there, it’s more likely. We are now forecasting the RBNZ to start hiking in November, lifting the OCR in steady steps to 1.75% by February 2023," she said.
"The market is already pricing in almost 90% odds of a hike by November, and 'one and a half’ hikes by February. As such, the hurdle for a hawkish surprise is high. We expect the MPR to validate, rather than spur on, expectations for earlier hikes (but post-MPR data could do that)."
The growing expectation of higher interest rates is likely to mean the end of record-low prices, with some variable rates below 2% and big four one year fixed rates under 2.2%.
Longer-term rates have already begun to edge up this year, influenced by wholesale bond markets, amid the expectation of rising inflation.
The Reserve Bank makes its latest OCR decision next week and is expected to keep rates on hold.
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