Foreign lending to the major banks before the onslaught of the global credit crunch 18 months ago had accounted for 30%-50% of bank lending in the domestic mortgage market.
But ABN Amro Craigs broker Peter McIntyre believes that has halved, in some instances, to 15%-25% for some major banks.
"In the United Kingdom and the United States especially, the banks are in [lending] turmoil and looking after their own borrowers in the first instance," Mr McIntyre said.
To fill the void left by the lack of foreign lenders, whose interest rates had soared from 3%-5% before the credit crunch to more than 7% in recent months, there had been a rush of issues in the bond, perpetual bond and debt markets, Mr McIntyre said.
"The banks have been aggressive in their issues to cover their funding requirements.
"It has been an opportune time for them because of what has happened in the finance company sector," Mr McIntyre said.
More than 20 finance companies have been placed in liquidation, suspended debenture payments or sought moratoriums on payments during the past 18 months.
Investors have flocked to the Australian-owned major banks during the past seven months to take a stake in bonds and perpetual bonds, as more bad news unravels in the finance company sector and reinvestment rates plummet.
With reinvestment rates for finance companies dropping from 60%-80% down to 15%, the cash of domestic investors is heading back to the major banks, offering interest rates ranging from 8.5% up to 9.87%.
Mr McIntyre said the banks would be wanting to avoid what happened to the finance sector and "match off the deposits and loans".
"They will not want to be borrowing short-term then lending long-term. At all costs, they will want to avoid a liquidity crisis later," he said.
Despite indicators the Reserve Bank may consider lowering the interest-driving official cash rate in September to offset the recession-headed economy, Mr McIntyre believes the banks will not in turn lower mortgage rates - at present, the highest in the developed world.
Historically, New Zealand banks used foreign loans for their fixed mortgage lending and domestic money from term deposits for the higher floating rates.
"It's [also] going to be a fight between the banks to maintain customers' term deposits when they come up for renewal," Mr McIntyre predicted.
As with the banks' bond issues, Telecom was similarly going to market with a "tap-issue" to raise a minimum $100 million, with a facility to take a further $200 million in subscriptions, as it, too, looked for cheaper capital closer to home than was on offer overseas, Mr McIntyre said.
However, Telecom has also sought to diversify its borrowing by going into a separate Swiss bond issue worth $258 million.
