The bank said this was driven by its competitive pricing and operational readiness during periods of heightened demand caused by pent-up activity and the stamp duty holiday.
Although its total income dropped by six per cent to £978m, TSB said this was offset by its strong mortgage trading performance in the second half of the year.
Its mortgage business also boosted its total lending which increased 7.2 per cent to £33.3bn.
Overall, TSB suffered a £240m year-on-year loss before tax for 2020 because of restrictions put in place to suppress the spread of Covid-19, reduced consumer spending and the low interest rate environment.
The average mortgage rates on the bank’s loan book reduced to 2.29 per cent compared with 2.53 per cent in 2019. It said this was due to increased competition in the market and lower rates on the fixed rate portion of its portfolio.
Looking ahead, TSB said the biggest risk to its mortgage portfolio was changing property values but considered the current impact to be low.
TSB also noted that measures to invest in refurbishments to improve energy efficiency in homes could impact borrower affordability in the future.
As well as assessing its existing mortgage book, TSB plans to manage this with a valuation tool which tests climate change risk at the point of mortgage origination and will evaluate every new property this year on its flooding and energy performance.
Richard Meddings, chairman of TSB, said: “I am extraordinarily proud of the way TSB employees have responded during the Covid-19 pandemic, displaying real customer focus in adversity.
“Although our results reflect the scale of the financial costs of the pandemic, it is significant that, during this tumultuous year, key aspects of TSB’s trading performance have improved significantly, and that the pace of change within our business has accelerated rapidly.”