When it comes to choosing a lender, most people will, quite understandably, look at the rates on offer. After all, we are only too aware – especially with current economic turbulence – the difference in monthly repayments that a fraction of a single interest rate percentage point can make.

However, there also needs to be other vital factors that come into play when choosing a mortgage provider. What is their customer service like? Do they offer multi-channel, online support? Is there good account access via an App? Do they provide an interactive platform whereby you can research the best end-of-fixed-term deals? And what are their plans for future innovations?

Against such considerations, the UK consumer champion group, Which? has recently released interesting new research stating that building societies have become the best mortgage providers.

The results are based on a survey of thousands of mortgage holders in July 2023 to find out how satisfied they were with their providers. They were asked to rate banks and building societies on a range of measures, from the application process to the ease of banking online and customer service.

Thousands of mortgages over a four-week period in August 2023 were also studied to find which lenders offered market-leading rates most often.

The top three spots were taken by  building societies – Nationwide, Skipton and Yorkshire, with Coventry and Leeds also making the top ten.

This survey raises an interesting question. What are building societies doing so well that is resonating with customers and analysts alike?

A move to modernise

Building societies have, without a doubt, upped the ante in recent years when it comes to updating how they interact with their customers.

Until recently, outdated, legacy systems remained a thorn in the side of some building societies. Often using cumbersome, paper-orientated processes, such building societies needed to employ specialist teams to carry out long telephone interviews, often repeated ones with the same customer.

Such an approach also raised a red flag where ESG is concerned, with such an approach often resulting in a high carbon footprint. With today’s consumers increasingly demanding that their financial providers up the ante when it comes to their green credentials, this was far from ideal.

Building societies would often also be reliant on customers living relatively close to their branch network, as many of their processes would involve a face-to-face approach. This immediately limited the pool of potential customers.

However, crucially, by modernising and updating their systems so they can offer a seamless, electronic application process and multiple interactive customer service channels, these building societies are reaching a huge amount of new people. Indeed, they can quite easily service customers from all over the UK, alongside those who live within their traditional geographical operating area.

This provides the best of both worlds for a building society. Still providing the valuable, face-to-face option for those living nearby, they remain true to their traditional community-focused values. However, alongside this traditional approach, they can now reach a much larger and much more varied customer-base, made up of anyone with internet access.

They have also recognised that a strong digital capability makes it much easier for their customers to re-apply for further fixed deals, fully online. This makes it much easier to keep their customers for a further period. As we know, it is usually much more cost-efficient to retain existing customers than proactively searching for new ones.

Decoupling the front end with the backend system provides a great alternative to help drive change and innovation at pace.  Having a modular and flexible digital experience platform which empowers the business to introduce new functionality against a specific timeline that can be matched exactly with the overall business plan.

Interactive support – on the customers’ terms

Together with this move to modernise has been a more concerted effort to offer a sophisticated level of multi-channel customer service options.

Let’s not forget that high levels of customer service are no longer a nice-to-have, they are a must-have. The expectations of today’s consumers are higher than they have ever been, driven by the instant gratification offered by e-tailers such as Amazon. The ability to start a journey on a mobile device, which comes with instant support and guidance through a chatbot or direct contact with an agent is now the new norm.

We are seeing building societies increasingly offering a suite of incredibly complex tools for their customers, including next generation features such as biometric authentication and live chat, and helping customers to self-serve, so they can manage their accounts at any time of the day or night.

Many homeowners will be driven by the best rates on offer when it comes to selecting a lender. This goes without saying. After all, none of us wants to be paying more than we need to do, especially against a cost-of-living crisis putting extra pressure on household expenditures across the land.

However, the ability to offer sophisticated, interactive customer service channels is a vital aspect that more consumers than ever are now expecting as a given. Without a doubt, building societies have drastically invested in their offering over recent years, which is reaping dividends.

Coupled with their face-to-face service levels, something which remains important for many customers, this means that not only are they reaching new customers, but they are also keeping their ‘traditional’ ones happy too by retaining the traditional service levels they are known for.

For those concerned they are only starting their digital transformation today, it is still better than starting it tomorrow. Deploying digital mortgage functionality is not the vast and expensive undertaking it once was – and by doing so, we can expect to see many more building societies making the top ten positions in any future lists of the best UK mortgage providers.

Jerry Young is chief executive of ieDigital