BNZ's chief economist says the Reserve Bank appears to have failed to learn the lessons of the pre-financial crisis property boom.
Housing prices rose sharply in the few years prior to 2008, briefly stumbled then began rising again - particularly in Auckland.
In recent months Auckland's unaffordable prices have driven investors south, with values in Tauranga, Waikato and Queenstown starting to pick up steam.
Tony Alexander says the Reserve Bank's comments on Thursday just poured fuel on the fire.
"I think it was a wee bit of a mistake, the comments yesterday," he told Paul Henry on Friday. "They've given the green light, they've given a timeframe - do it now, because it's going to be harder in maybe six months' time."
Deputy Governor Grant Spencer said the Bank was considering tightening loan-to-value ratios for investors, but made no immediate changes to the existing rules.
Mr Alexander says there's been enough talk - it's time to act.
"They need to keep up with what they market's doing, and what's happened over the past year... every man and his dog has decided they're missing out on rapidly rising house prices and they need to get in."
Mr Spencer suggested debt-to-income ratios could be looked at - limiting how much banks could lend depending on a person's income - but Mr Alexander says it's probably too late for that to work. House prices are far too high, compared to average incomes.
"It would be quite a constraint in New Zealand, given where house prices have gone."
Mr Spencer's comments came after Prime Minister John Key urged the Bank to "get on with" dampening demand for property. Labour's Annette King says the Bank should be allowed to do what it wants, whether the Government likes it or not.
"He's doing his own thing, he's looking at the overall economy," she told Paul Henry.
She says the Bank can only handle the demand side - it's up to the Government to fix the supply.
"We know we've got a housing crisis, the public know we have, and people are looking at what measures should be in place. You have to look at the supply side - how many houses are we building? Why haven't we got a major building programme in place, led by the Government?"
Ms King also took a shot at Mr Key over his "get on with it" comments, saying the Reserve Bank needs to stay independent.
"The last thing we want is the Government saying 'we're gonna take control and this is what you're going to do'."
Mr Spencer also told the Government to reconsider its migration policy, saying it was putting upward pressure on house prices. Mr Alexander says listening to that advice could backfire.
"We do need more skilled workers in New Zealand, especially in the construction sector, so if you cut back on the migration you're sort of biting off your nose to spite your face."