The lender said it completed mortgages for approximately 20,000 customers in the six months to end-June and that its mortgage application process is now significantly quicker.
TSB noted that the competitive mortgage market had impacted net interest margin, which fell to 2.76 per cent in H1 2019, down from 2.82 per cent in the comparable period H1 2018 and from 2.92 per cent in H2 2018.
The gross mortgage lending figure compares to H1 2018, when TSB was set back significantly by a technology failure. In that period, the bank advanced £2.6bn of new mortgages, a sharp drop from £4.1bn in H1 2017.
Return to profitability
The bank returned to profitability in H1 2019, with a statutory profit before tax of £21.1m versus a loss of £107.4m in H1 2018.
The bank revealed that IT incidents were in line with the industry and that it had cleared all complaints from the migration failure, which cost the bank a further 36.2m in the last six months.
“We’ve addressed all customer complaints in relation to migration and new customer complaints are at industry levels,” it said.
The mortgage portfolio loan-to-value remained at 44.0 per cent, excluding the closed book of former Northern Rock mortgages which TSB purchased in April 2017.
The total loan book increased £400m to £30.4bn and total customer deposits increased £700m to £29.8bn.
Challenging and uncertain conditions
“GDP growth is expected to be flat in the second quarter of the year and the UK economic and market conditions continue to remain challenging and uncertain,” TSB said.
“The UK’s pending exit from the EU and an ongoing low interest rate environment all contribute to ongoing ambiguity for financial markets and businesses.
“TSB is one of the most strongly capitalised banks in the country and, by maintaining a healthy liquidity reserve, is well placed to weather economic volatility or shocks.
“In the second half of the year, TSB will continue to focus on business improvement and deliver a long-term plan for growth,” it added.
Legal and General Mortgage Club members will have access to a five-year fixed rate residential product, available at 95 per cent loan to value (LTV) exclusively through the mutual.
Starting from 2.99 per cent, the product has a minimum loan value of £25,000 and a maximum value of £500,000 with fees of £499, consisting of £199 upfront and £300 upon completion.
The product is aimed at helping first-time buyers with a small deposit get onto the property ladder as well as providing an option for customers looking to remortgage out of the Help to Buy or Shared Ownership schemes.
Danny Belton, head of lender relationships of Legal and General Mortgage Club (pictured), said: “It is great to see an increasing number of lenders offering 95 per cent LTV mortgages, allowing buyers with small deposits to achieve their homeownership goals and providing more options for those looking to remortgage out of either Help to Buy or shared ownership.
“Legal and General Mortgage Club has been working closely with Ipswich Building Society to develop this offering and we are excited to work together to further build and support this proposition, bringing exclusive products to our key partners.”
Richard Norrington, CEO of Ipswich BS, said: “We are delighted to offer this exclusive deal to Legal & General Mortgage Club, which is ideal for applicants purchasing with a low deposit or remortgaging with a small amount of equity in their home.
“For aspiring first-time buyers receiving help from their family we welcome applicants using gifted deposits, and can consider entirely gifted funds up to 95 per cent LTV with 12 months rental history or 90 per cent LTV without.”
TSB reduces rates for homebuyer and remortgage borrowers
TSB has reduced interest rates by up to 0.10 per cent on mortgages for home buyer and remortgage borrowers.
Changes include reductions of up to 0.10 per cent on selected five-year fixes for purchase and remortgage, with LTV ranging between 0 and 85 per cent.
Further reductions of up to 0.05 per cent on selected three-year fixed remortgage rates, with LTV ranging between 0 and 75 per cent.
Nick Smith, TSB’s head of mortgages, said: “At TSB we want to help more people to borrow well and these changes are an example of us doing exactly that. The interest rate reductions on our fixed rate products are a welcome step for those looking to fix their monthly payments for a longer period of time, with the added bonus of free legals or £300 cashback.”
TSB’s gross mortgage lending fell by a third last year to £4.8bn, down from £7bn the previous year after the bank was forced to reduce new lending in the second and third quarters due to IT failures.
However, applications increased by 142 per cent in the fourth quarter compared to the previous three months and the bank said it was entering 2019 with a strong completion pipeline.
TSB apologised to mortgage brokers in November last year for its delayed introduction of product transfer fees as IT resource had been drawn off to cope with the emergency.
But Roland McCormack, mortgage intermediary director at TSB said: “I wrote to brokers, kept them up to date and gave them the opportunity to email or ring me and a lot of them did and quite rightly shared their frustrations.”
However, the launch in November went well he says and TSB has done more than £600m of product transfers (PTs) since then.
He added: “And we continue to get rave reviews from brokers because our system has reduced [the duration of] a PT to two minutes. Also, we put no barriers in the way of a customer doing a PT with us, whether interest-only or in arrears – any customer gets a product transfer.”
Evolving technology
I ask McCormack how the bank decides on which strand of work to prioritise on the mortgage side, with lender updates, broker updates, third party connectivity and so on all 15 years ‘overdue’ in McCormack’s own words.
He replies that TSB’s new system, Mortgage Pro, allows the lender to launch far more flexible products including product transfers, free valuations on purchase and cashback instead of free legals and these changes had to be phase one.
Phase two will be all about connectivity with the broker, with end-to-end connectivity in TSB’s sights.
TSB is prioritising intermediary distribution over branch because of the sheer volume of business coming through the broker channel. McCormack added he is not seeing ‘anything’ telling the bank it needs an execution-only digital service, other than in the product transfer space where customers can switch up to three months before the end date and choose the route they want to take.
“We pay 30 bps to brokers, so the customer can decide,” said McCormack.
When asked if there is anything showing that customers are keen to buy a mortgage in two minutes with no advice on an aggregator site, McCormack says no.
“If we step back you have to look at the problem it’s solving. Customers have plenty of choice of channel and predominantly they use intermediaries. They go to advisers for local relationships, to shop around for the best mortgages, we have very competitive products and great customer outcomes so people are getting great quality advice.
“So, how does migrating everything online create a better deal for customers?” he asks.
He also says the other key factors so often missed are the complexity of the mortgage process for customers and the heavy-lifting done by brokers to get deals done by whatever means necessary in a shorter space of time.
Potential for lender collaboration
In this era of shared problems and individual technology solutions, I ask McCormack if he’s been invited to a technology forum or to ideas share to move industry collaboration onwards?
Not yet, he says smiling. “The challenge of doing that is that its complicated producing a technology solution for one lender, for example the common application form. Actually, it’ll be about 92-pages. Because everyone wants something different.
“I just think it’s very difficult to get 22 lenders to agree on anything,” he adds.
“Instead we have some good technology companies who have got to come up with some good solutions and our job is to facilitate the link between broker and ourselves and provide a good product. There’s no point us telling brokers how to do business with us.”
2019 strategy
TSB took on another 500 directly authorised (DA) brokers from December to January, alongside some additional networks and that distribution reach to more DAs will continue to widen throughout the year.
The bank has also become the new sole sponsor of the Association of Mortgage Intermediaries (AMI) annual dinner as a ‘mark of respect’ to the work AMI CEO Robert Sinclair and the trade body undertake.
The lender has broadened its product range in recent weeks with a buy-to-let product with no early redemption charge offering flexibility, with other things in the pipeline, including free legals and cashback, says McCormack.
The banks plans to serve more of the market with self-employed and contractor mortgages and a large loan proposition, which means it has lifting its income cap to 4.7 x, which will make TSB’s products more appealing in the capital.
Our speed to market has gone from 18 months to a couple of weeks with the new Mortgage Pro mortgage architecture, he adds.
The third key strand for this year will be leveraging technology, says McCormack, and the end-to-end mortgage process for brokers.
“We have already announced our partnership with Twenty7Tec and there are other parties we are working with. We are working on how we can slim down and cut the mortgage journey.
“Pressure points can still be addressed – lots of little things which can be automated, so using Automated Valuation Models more widely, for example, and many more could take as much as five or six days out of the process.”
Further digital partnerships
It seems the beauty parade of potential technology partnerships continues apace with plenty of meetings still ongoing and TSB will announce further relationships in the coming weeks.
“We think there will be a minimum of two good suppliers in this market, potentially a couple more, and that’s good for all of us as no-one wants to have one supplier doing the links.”
He added: “Many of the things I’ve been presented look great on a Powerpoint, but had little substance behind them. The danger is that we try to design the ‘all singing, all dancing end game’, but there is actually really good stuff that can be done relatively quickly. Instead, let’s get something out there that helps brokers and our customers and let’s learn and build on it?”
So when will brokers at the coalface start to see mortgage processing times fall and real change, I ask.
“My expectation is that a significant part of the lending industry will have linked to brokers by March 2020. What I’m not seeing is [lenders] paying lip service – Fear Of Missing Out (FOMO) is very real. It’s happening. It’s probably 15 years late, but the theory is that this will create huge value for brokers,” he adds.
“It’ll create huge amounts of efficiency, not just avoiding re-keying, or mistakes made through re-keying…technology will create one version of the truth and will also make compliance a lot simpler.”
The lender has also added a two-year buy-to-let product for purchase and remortgage with no early repayment charge.
TSB increased its five-year fixed residential remortgage rates by 0.10% and 0.05%, for its 0-60% and 60-75% loan to value (LTV) products respectively.
The bank has also increased its minimum loan size from £5,000 to £25,000 for two-, three-, five- and ten-year fixed deals at up to 60% LTV with no product fee.
Nick Smith, TSB head of mortgages, said buy to let continued to play a significant role in the UK’s housing market.
He added: “So, from today, we’re delighted to offer our new two-year product to further support landlords looking to remortgage or invest in a property.”
Julian Harris panel
TSB intermediary products are now also available to Julian Harris Adviser Networks’ members.
Helen Harris, director of Julian Harris Adviser Networks (pictured), said: “We are committed to providing our members with the best services and products. With that in mind, we are delighted with the latest addition of TSB to our panel.
“Our completely independent, whole-of-market offering is something that we are extremely proud of.”
Roland McCormack, mortgage intermediary director at TSB, added that the partnership demonstrated TSB’s commitment to the intermediary market.
He said: “We’ve taken our distribution coverage to over 80% of the market with plans to grow further over the coming months.”
The survey was split into personal and business account holders. Customers were asked if they would recommend their bank in five key categories and the results are published in league tables.
There was good news for Metro Bank which came top for overall service among personal customers and rated highly in other categories, including online banking and services in branch.
Eighty-three per cent of personal banking customers said they would recommend Metro Bank, a coup for the bank that was only established in 2010.
First Direct also scored highly with personal customers, being voted best for overdraft services as well as online and mobile banking.
Best for business
Among business customers, Swedish bank Handelsbanken received glowing feedback, as they were rated best in four out of five categories. They only business banking category in which they didn’t come top was online and mobile services, where Barclays lead the way.
TSB were among the banks where dramatic improvement is needed. They will be alarmed to have come bottom for overall services, as only 42% of their customers said they would recommend the bank.
The independent survey was carried out between February and December 2018 by GfK UK Limited. It is the second set of results to be published, following the first in August last year.
It was introduced as a measure to improve the quality of UK banking by the Competition and Markets Authority (CMA), following its market investigation into the banking sector in 2016.
TSB has cut interest rates on its two-year, five-year and ten-year fixed rate mortgages for house purchase and remortgage borrowers.
Changes include a reduction of 0.10% for two-year fixed house purchase at up to 90-95% loan to values (LTV), as well as for ten-year fixed house purchase and remortgage at 0-75% LTV.
They also include a reduction of 0.05% for five-year fixed remortgages at 60-85% LTV.
Nick Smith, TSB’s head of mortgages, said: “Many borrowers like the security of longer term deals and also do not want to remortgage every couple of years so our 10-year fixed rate is just another example of us helping more people to borrow well and a welcome step for those looking to fix their monthly payments for a longer period of time.
“This mortgage is fully portable if customers decide to move so not only gives customers certainty but also offers them flexibility.”
Leeds Building Society
Leeds BS has introduced a no fee fixed rate retirement interest only (RIO) mortgage, following the launch of the ten-year RIO product.
The new no fee five-year 3.83% fixed rate is available up to 55% LTV and comes with a free standard valuation.
Matt Bartle, Leeds Building Society’s director of products (pictured), said that it was the only no fee fixed rate RIO mortgage available in the market.
He added: “We continually keep our mortgage range under review and these products are the latest examples of our commitment to offering more choice to consumers, particularly those less well served by the wider market.”
Marsden BS has added new products across its expat, older borrower, retirement interest-only (RIO) and residential ranges.
It has also launched new products, including a five-year fixed expat buy-to-let product.
Steve Robinson, head of lending at the Marsden (pictured), said: “ Following feedback from brokers looking for an alternative to bridging, we have introduced a product with a maximum of a two-year product term on interest only and has no early repayment charges which is available up to 60% loan to value (LTV).
“We were finding many intermediaries looking for options for their clients who are in the process of buying and potentially need a short-term mortgage.
“This is a new initiative that we are trialing in the market and welcome feedback from brokers and their clients.”
TSB
TSB has cut mortgage rates by up to 0.1% on its five-year fixed rate mortgages, for both residential and remortgage borrowers.
It has also reduced the five-year fixed house purchase from 75% to 85% loan to value (LTV) by 0.05%, while the five-year fixed remortgage up to 60% LTV has been reduced by 0.1%.
The bank has also increased the rate on its two-year fixed house purchase mortgage from 85% to 90% LTV, with £995 fee, by 0.2%.
Nick Smith, TSB’s head of mortgages, said: “We are seeing more and more of our borrowers fixing for a longer period, so these rate reductions will be very welcome for many of our borrowers.”
However, applications increased by 142 per cent in the fourth quarter compared to the previous three months and the bank said it was entering 2019 with a strong completion pipeline.
It also highlighted that it’s new IT system allowed brokers to submit applications in half the time compared with the old system.
“TSB has already started to see the benefit with the busiest ever week in the bank’s history for mortgage applications in December 2018,” it said.
Its mortgage portfolio loan-to-value (LTV) remained “conservative” at 44 per cent.
IT failure costs £330m
Overall TSB reported a pre-tax loss of £105.4m with costs from the IT failure including customer compensation, additional resources, fraud and lost income of £330.2m.
It expects to recover £153m of this from its IT provider, Sabis.
However, despite the IT failure the bank gained more customers than it lost.
Around 80,000 customers switched their bank account away from TSB in 2018 with volumes peaking in Q2, compared with 50,000 customers switching away in 2017.
In contrast, 140,000 customers opened a new bank account or switched their account to TSB in 2018.
In 2017 the lender recorded a pre-tax profit of £162.7m with gross mortgage lending of £7bn.
‘Most challenging year’
TSB executive chairman Richard Meddings said: “2018 was TSB’s most challenging year and we are sorry for letting our customers down.
“Looking forward, we’re now a stronger bank for our experience, with a trusted brand, able to serve more customers in more communities than ever before.”
