The Reserve Bank of New Zealand has warned that rising mortgage rates could drive house prices down further, as the country faces a slower economic recovery than previously anticipated. In its latest Financial Stability Report, the RBNZ highlighted concerns about weakening job growth and the mounting pressure on households struggling with debt servicing as borrowing costs continue to climb.

Despite these headwinds, the central bank expressed confidence that New Zealand's financial system remains resilient. Banks are well-positioned to weather the economic turbulence, while the agricultural sector maintains its strong fundamentals even as the broader economy grapples with softer conditions. The housing market continues to show signs of weakness, with the combination of elevated interest rates and economic uncertainty creating a challenging environment for both buyers and sellers.

The RBNZ's assessment underscores the delicate balancing act facing policymakers as they navigate between controlling inflation and supporting economic growth. While higher mortgage rates are intended to cool demand and bring down prices, the report acknowledges the broader implications for household finances and employment prospects across the economy.