Executive on how it's set its sights on a fresh marketplace
“The market is overwhelmingly resilient,” noted Kevin McGovern (pictured), regional development manager for Danske Bank – the man who’s leading its expansion from Northern Ireland into England’s lucrative mortgage marketplace. “It has probably been one of the most volatile periods for mortgage brokers and lenders for quite some time. We obviously had the COVID crisis, the interest rate fluctuation, now inflation and cost-of-living pressures. We're moving back into a reducing interest rate environment, albeit the geopolitical space has been quite volatile recently - it is a challenge.”
Regardless of how resilient the mortgage market is in England, it begs the question of why Danske Bank – the trading name for Northern Bank, which has existed for around 200 years in Northern Ireland – would have chosen these turbulent few years to make the move into the English space. “It's that old adage that if you wait for the perfect time, you would never do anything,” explained McGovern. “Three years ago, we made the strategic decision to start to sell mortgages in the South of England. The primary reason for that is that we were expanding our market share in our home market and had further capacity for growth.
“Historically, the performance of the mortgage market in the South of England has always been strong and even through the financial downturn there was a strong track record of property ownership and property prices recovered relatively quickly. The average house price is significantly higher in England, therefore to achieve balance sheet growth you can do that with fewer cases which improves efficiencies. The average mortgage that we do in England is around £330,000, whereas the average mortgage we do in Northern Ireland is closer to £170,000. So, there's an economy of scale there just in terms of the deal size whilst maintaining really strong credit quality. It also helps us to diversify our risk geographically.”
The bank, which was rebranded under the name of its Danish parent company in late 2012, has long provided services to the population of Northern Ireland, including personal and private banking, current accounts, savings, and business & corporate banking facilities. It is also the number one provider of mortgages in the region. “We already had a bit of a footprint in the South of England, serving high net worth private banking customers of our parent company in Denmark who were moving to the UK, and in 2022 we launched our energy efficient home loans into the English mortgage market,” McGovern said.
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Building brand recognition
The biggest challenge, he acknowledges, is building brand recognition. “We are the biggest bank in Northern Ireland, a high street name, and have branches and business centres right across the region,” McGovern noted. “In England we do not have the same brand presence, so a lot of brokers and a lot of customers that they're referring to us wouldn't be familiar with Danske Bank. It's really about trying to enhance our brand, to build that trust, for them to place their business with us.
“We were very selective in the areas that we would focus on, that we would have full trust in our ability to deliver. We have a focus on sustainability and providing finance to consumers looking to purchase energy efficient homes. We've done things such as allowing these customers to borrow slightly more, to give them a bit of an affordability boost, on the understanding that their monthly heating and electric bills for those properties should be less. We're trying to encourage more people and educate homeowners on the benefits of owning a more energy efficient property. In the longer term, we also want to provide retrofit opportunities where homeowner will be able to improve their energy efficiency ratings. We have also developed a specific proposition through our skilled team of private banking managers for larger loans of above £750,000, and that's for people with either multiple or complex income streams that sometimes struggle to get mortgages with high street banks.”
McGovern acknowledges that Danske Bank is currently restricted in England in two key ways. Outside of its boutique private banking offering, it only sells mortgages through the intermediary market, and its distribution is solely through Mortgage Advice Bureau. “We didn't want to do too much too soon,” he said. “We're only operating in certain regions, currently the South West, the South East, the East of England, including London, and then the East and West Midlands. We have strong growth ambitions and plan to expand further over the coming years, but we're keen on growing in a steady and sustainable way.
“Whilst we are moving to a very digitised process, we think it's enhanced by our people being ultra-accessible - brokers in England can speak directly to our BDM and underwriting teams. That level of dialogue and direct access is something, I feel, that sets us apart. We've hired a number of business development managers as well as providing new career growth opportunities for NI-based colleagues- who are the face of our brand and who have developed strong relationships with brokers. Our relationship with intermediaries is massively important.”
Danske Bank has been encouraged by its performance so far. “In the very early days, we thought we might struggle to get a foothold in the English mortgage market given the level of competition, but it has been really successful,” McGovern said. “We have probably at times over performed in terms of our anticipation and that can bring some operational challenges. Ultimately, we see this as a very large market that has room for lots of different lenders, and we're trying to fill a small gap that gives more mortgage brokers the opportunity to place business. We have learned a lot from our expansion into England and have been able to make numerous enhancements to our proposition that further supports not only our new customers in England, but also our customers in NI. We're entirely confident with the direction of travel.”
