Market uncertainty and high interest rates saw the mortgages market in Northern Ireland drop by around 25% during 2023, Danske said.
But despite the challenges, the bank increased its pre-tax profits by around 80% to £186m.
Chief executive Vicky Davies said: “Transaction levels in the mortgage market were slow in quarter one but remained at healthy levels across the rest of the year, with new mortgage lending approvals in the second half of the year 25% higher than in the first half.”
The bank credited the drop in activity to uncertainty in the market, higher interest rates and the cost-of-living squeeze still affecting many of its customers.
Interest rates were around 3.25% at the start of 2023 and rose to 5.25% over the year and have been maintained at that level since.
Ms Davies said that the bank acknowledges that many people are still facing pressures due to the cost of living crisis, and said it would work to continue to support customers who need it.
But Northern Ireland’s resilient housing market, which out-performed the rest of the UK, and low unemployment rates contributed to the bank’s strong performance.
Interest rate volatility during the year meant the bank had made the most mortgage changes in a single year to date, she said.
The bank said that it had dropped average rates by around 2% over the course of the year, with its average mortgage interest rate now around 4.75%
But despite the interest rate environment, the bank provided over £500m of mortgage lending approvals during the year.
It reported a strong loan book with low arrears, which it credited to Northern Ireland’s low unemployment levels, which are currently lower than the UK average.
The profits were also boosted by an extra £13.1 freed up from loan impairments, compared to 2022 when loan impairments cut nearly £20m from the bank’s bottom line.
A boost in two-year fixed mortgages, which were taken out by 47% of mortgage customers during the year compared to 27% the year before. was credited to consumer belief in a future drop in interest rates.
Interest rates are now believed to have peaked, and predictions are that they could begin to drop as early as May, with estimates that they may reach as low as 4% by the end of the year.
Deposits at Danske Bank saw a modest increase of 1% going up from £10.6m to £10.7m over the year.
A slight drop in personal deposits was down to cost-of-living pressures – but an increase in business deposits contributed to the slight increase, the bank said.
The bank’s business arm also achieved £575m in lending approvals, but saw a small drop in new approvals over the year.
This was credited to a combination of uncertainty in the market, higher borrowing costs and high liquidity among businesses.
But Danske Bank said lending approvals for small businesses were up 23% year-on-year, while sustainable finance lending in corporate and business banking was another growth area, up 46% year-on-year.
The bank added that the underlying drawdown and utilisation figures had remained consistent throughout the year, despite the slowdown in new approvals.
The bank said that half of the Top 100 Companies who use local lenders were banking with them, though it was focusing on expanding its offering to small businesses.
