While I have "solved" the issue by adding the FQDN of my Report Server to trusted local intranet sites, I have noticed before then if I used:
http://reportserver/reports
Internet Explorer will use NTLM and login for me.
However if I use:
http://reportserver.mydomain.local/reports
Internet Explorer will prompt me for credentials, not allowing NTLM to occur.
Why is this? What is the logical reason?