TSB: How’s it looking one year on?

Tuesday September 9, 2014 marks one year since TSB opened its doors, promising a local banking alternative to the big banks.

 
TSB one year on

To celebrate, the bank is giving itself a £125m 'first birthday present' which will pay for the following:

  • 30 new branches, adding to its current 631
  • 80 new cash machines, bring the total to 831
  • The refurbishment of 24 branches
  • A review of branch opening hours to ensure each 'fits the needs of the local community'
  • A local-rate phone number for each branch
  • Development of its online and mobile banking services

Chief executive, Paul Pester, said the changes would 'offer more people the chance to benefit from Britain's challenger bank'.

But has TSB delivered on its promises from last year? Let’s find out.

Mortgages

TSB logo
TSB is offering some of the lowest tracker mortgage rates around. Here’s our pick of its top deals, depending on the deposit you can raise:

40% deposit: Two-year tracker at 1.54%. Just watch out for the chunky £1,995 arrangement fee, plus the £265 completion fee.

25% deposit: Two-year tracker at 1.59%. But it comes with the same hefty fees of £1,995 plus £265.

However this offer can be beaten by Tesco Bank:

40% deposit: Tesco Bank’s two-year tracker offers a lower rate of 1.5%. Fees are also cheaper at £800 plus £195.

TSB’s fixed-rate deals at this same deposit level are also less attractive. Its lowest two-year fix for remortgage customers comes with a rate of 2.19% and charges a £1,995 fee. But HSBC’s rival deal is just 1.49% with a £1,999 fee.

That said, TSB has just launched a mortgage campaign which promises to cover the cost of the property's Council Tax for a whole year - the money is paid into your current account within three months of mortgage completion. The offer is available to both first-timers and homemovers, though only on mortgages of between 75% and 90% of the property value. This perk CAN be worth up to £2,500 so check out what's on offer and compare the overall cost to any other mortgage 'best buys' you have found.

Current accounts

Looking for high interest on the cash in your bank account?

Then TSB has come up trumps with its Classic Plus account, paying 5% on balances up to £2,000.

The account matches the 5% paid by Nationwide’s FlexDirect account on bigger balances up to £2,500.

But the TSB headline rate is ongoing, whereas Nationwide’s customers, after 12 months, will see the rate fall to just 1%.

The TSB account can be serviced with just £500 a month too, versus £1,000 a month with Nationwide.

But beware…

TSB Classic Plus charges 19.9% on arranged overdrafts. So, if you sometimes dip into the red, the Nationwide account may be better if you need 12 months to dig yourself out - as borrowing is interest-free. 

Savings

TSB has failed to make a splash in the savings market. In fact, most of its accounts are far from best buys.

Take its instant access Cash ISA Saver. The headline rate is just 0.75% on up to £10,000 and 1% on larger amounts.

That’s less than half the 1.55% you can get on £1 with BM Savings’ postal ISA Extra.

Just don’t forget to switch when the BM Savings bonus of 1.05% comes to an end after 12 months.

TSB’s two-year fixed-rate ISA also misses the mark.

  • It pays 1.55% on £1 or more, but has a minimum opening balance of £3,000.
  • But the AA has a two-year ISA paying 2% on £1.
  • *And you can earn 1.55% on £500 or more with Halifax by fixing for just one year.

Shop around for the best returns on your cash on our savings channel.

Customer service

TSB does not have an investment-banking arm. Instead, it focuses on “local banking” through its 631 branches.

But that hasn’t helped it beat its competition when it comes to service.

Just 52% of TSB Classic Plus customers rate the service provided as “great”, according to MoneySavingExpert ratings.

That’s a poor show compared to customer service leader First Direct, judged “great” by a massive 92% of its customers – as you’ll see below:

TSB:

  • Great 52%
  • OK 36%
  • Poor 12%

First Direct:

  • Great 92%
  • OK 6%
  • Poor 2%

What's the verdict?

In its first full year, TSB's real winner has been its Classic Plus current account which offers a no-nonsense market-leading rate of 5% on your cash. In terms of mortgages, if you don't think interest rates are going to go up any time soon and consider a high fee is worth paying, it's tracker rate mortgages are also worth looking at - especially if you have a deposit of between 10% and 25%.

But, as things stand, TSB is NOT the best bank if you are looking for high savings rates on larger sums of cash and/or you consider top-quality customer service a priority. Although with the planned improvements set out above, any of this could change...

Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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