Substantial mortgage losses 'unlikely' in NZ 07 July 2015 3:55PM Ian Rogers A warm review of New Zealand's sovereign rating from Fitch Ratings drew out mostly comforting commentary on the country's banking system."A sharp fall in Auckland house prices could pose a downside risk to the economy, although Fitch thinks a scenario that will lead to substantial mortgage losses for banks is unlikely," the ratings agency said.Auckland house prices "are rising at potentially unsustainable levels, with average prices at over seven times average income (compared with four times in the rest of New Zealand)," Fitch cautioned. Development of the Open Bank Resolution framework and backing from Australian parent banks "should limit contingent liabilities on the sovereign to support the system during times of stress," Fitch said."However there is a risk that potential problems in the Australian banking sector would spill over to the New Zealand financial system."Fitch last night affirmed New Zealand's long-term foreign and local currency issuer default ratings at AA and AA+ respectively.