A SLOWDOWN in the housing market is starting to strain banks' balance sheets, with the biggest lenders being forced to pay top dollar to lock in longer-term funding.

Commonwealth Bank and Westpac have tapped local investors for a combined $6.6 billion in recent weeks, paying a premium to secure bonds with a maturity of five years, at a time when Europe's debt problems continue to push up costs.

This month, ANZ raised $1.2 billion in 10-year funds from European investors in the most expensive raising so far this year. It is also planning to sell four-year bonds to Japanese investors in the next few weeks.

These high costs are adding to pressure to push through additional interest rate rises on home loans as banks seek to protect profit margins.

While the banks remain well funded, senior executives privately concede a slowing housing market as well as pressures across the east coast economy have meant home loan customers are now taking longer than expected to pay down mortgages.