An investigation by the Otago Daily Times showed that three financial institutions had each provisioned between $2 million and $5 million to cover mortgages that could default.
Bankers said the Government was aware of the likelihood of defaults occurring and banks were allowing for that possibility.
"People are looking at their situation, finding their land is badly damaged. They might get a bulk payout and the Government takes back the land. They still need to build somewhere else but how do they facilitate that.
"The loans are not written off and the people have had enough. They could say 'stuff it' we are moving on," one banker said on the condition he was not named.
If someone stopped paying the mortgage, the bank would force a mortgagee sale in normal circumstances. However, if the property could not be sold - as would be the case in some areas of Christchurch - the bank would foreclose on the borrower who was legally liable for any loss.
The situation was complicated. People were facing job losses, a fall in valuation of their houses, they were under-insured and facing an abandonment of their suburbs, which could never be rebuilt.
The banks were in a non-competitive area in that regard and had been in contact with each other about the issue of people walking away from their mortgages.
Residents were believing this was as bad as it could get for them. Events this week had been the final straw and they could see no other way out of their situation.
Banks expected an increased number of bankruptcies from Christchurch.
Most of the residents would not be affected long-term by bankruptcy, one banker said. They were not likely to be company directors or have a job in which they would be penalised for being bankrupt.
Port Hills MP Ruth Dyson said most people who were leaving the city were continuing to pay their debt and there was help to pay rent and mortgage.
Many of her constituents were saying they wished they could leave but realised they could not because of their debt.
What was not being recognised were the extra costs associated with having to rent accommodation in other parts of the city.
Getting children to school sometimes involved a 45min drive instead of just a few minutes. Some roads could not be driven on. Activities such as going to the supermarket were major expeditions because there were no supermarkets operating in some parts of Christchurch.
Those extra costs were causing stress for residents and now pupils were facing the extra stress of a cold winter and not finishing school until 5.30pm. They caught a bus at 6pm and faced an hour-long journey home, she said.
Craigs Investment Partners broker Chris Timms said the level to which banks' profits would be affected would depend on their exposure to the Christchurch housing market. New Zealand-owned banks and institutions were more likely to be affected than Australian-owned retail banks.
The Australian banks were already well provisioned for financial losses given the flooding in Queensland and the global financial crisis.
There had been no precedent for these events in New Zealand, and there was no way of judging to what extent people would walk away, Mr Timms said.
