The bank said maturing borrowers were entering a higher rate environment and strong competition in the market, leading them to shop around for the best deal.
TSB did not give breakdown figures for its mortgage lending performance last year, but said an additional 7% of borrowers chose to remain with the bank when refinancing.
It reported a 9.5% rise in mortgage completions, and its mortgage book was flat at around £34bn.
TSB’s net interest margin improved by 21 basis points to 2.89% and its total income increased by 3.6% to £1.14bn.
The bank closed the year with a profit before tax of £350.4m, a 20.7% increase on the year before.
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Marc Armengol, chief executive of TSB, said: “2025 was an extraordinary year for TSB. Our record financial performance was underpinned by the committed, collective effort of my colleagues: stepping up to ensure we stay truly competitive, deliver money confidence for our customers, act responsibly and run the bank more efficiently.”
Looking forward, the report said its record performance put it in a good position to deliver great value as part of the Santander Group. In July last year, TSB’s owner Banco Sabadell agreed to sell the bank to Santander.
