High street lender TSB has revealed that profits dropped by almost a quarter for the past half-year due to weakness in the mortgage market.

The firm, which is part of Spain’s Banco Sabadell, reported a pre-tax profit of £111.6 million for the six months to June, down 24.5% against the same period a year earlier.

TSB said this was due to lower income, which fell by 6.1% to £548.7 million for the half-year.

Income was impacted by lower mortgage margins due to “challenging” market conditions in the face of high interest rates, while the company also paid out significantly more interest to its savings customers.

It comes amid a backdrop of UK interest rates sitting at a 16-year high of 5.25%, meaning mortgage rates remain elevated.

The bank also said on Tuesday that it has made “good progress” against its current strategy, which saw the firm cut branches earlier this year.

In May, TSB said it would shut 36 branches and cut 250 jobs as not enough customers were using the sites.

In the fresh update, TSB said customer deposits were down by £0.4 billion to £35.0 billion year-on-year but it highlighted that deposits were up slightly from the start of the half-year amid demand for key savings accounts.

The bank also reported that credit impairment charges fell by £8.6 million to £19.1 million for the period.

Robin Bulloch, TSB’s chief executive officer, said: “Our focus in 2024 is making TSB simpler and easier to bank with, and I’m delighted to see more customers choosing TSB.

“We continue to make good progress against our strategy and I’d like to thank everyone at TSB for their continued efforts to support our customers and communities, helping them feel more money-confident.”

The update came as parent firm Banco Sabadell posted an increase in first-half profits.