Nationwide has struck a deal to purchase Virgin Money in a deal worth £2.9billion, creating the UK’s second largest mortgage and savings group. The move by Nationwide will see it take-on the Halifax to win the crown as Britain’s biggest mortgage lender.

Mortgage brokers are divided on whether or not the move will be good news for consumers. While Nationwide, which is owned by its members, has a good reputation for customer service the merger will reduce competition and choice.

The building society announced its intention to use the Virgin brand at first but to then steadily phase out the branding over the course of six years.

This could leave Virgin Money’s 7,300 employees at risk in the future, but Nationwide have confirmed they will not make material changes ‘in the near term’.

It is unclear at the moment how many of these employees will join Nationwide’s 18,000 strong workforce in the long term.

Virgin Money currently serves around 6.6million customers whereas Nationwide, the largest building society in the UK, has nearly 18million customers.

This acquisition would make Nationwide the second largest mortgage and savings group, only behind Lloyds Banking Group, which owns the Halifax, with 696 branches.

Nationwide will steadily incorporate Virgin Money but current Virgin customers will not automatically become Nationwide members.

For the time being Virgin Money will continue to operate in the same way as a separate legal entity. The sale has not been entirely finalised as it still needs to be backed entirely by Virgin’s shareholders.

RBC Capital Markets analyst Benjamin Toms told Reuters: “With the outlook for the UK economy stabilising, we wouldn't be surprised to see more deals like this announced.

“UK bank valuations are relatively cheap for the sustainable returns they offer.”

Graham Cox, Director at SEMH Self-Employed Mortgages told Newspage: "Nationwide is firing a shot across the bows of Halifax with this acquisition, threatening their status as the UK's number one mortgage lender by market share.

“Nationwide's reach will also increase banking competition on the high street, which can only be a good thing for consumers, given how complacent some of the established banks are."

Ben Perks, Managing Director at Orchard Financial Advisers, said: "This is quite the power play by Nationwide.”

Justin Moy, Managing Director at EHF Mortgages, said: "Consolidation within the mortgage market is inevitable when thin margins and reduced application numbers are set to continue for a long period of time.

“This will inevitably reduce competition in the residential market, potentially costing borrowers over the long term, and with the different borrower focus of each lending brand it will be interesting to see what Nationwide would focus on.”

Ranald Mitchell, Director at Charwin Private Clients, said: "Nationwide are making a bold move with the acquisition of Virgin Money. One way to increase market share is to buy competitors rather than slog it out at the retail end of the market.

“In difficult times, consolidation and mergers become more prevelant, reducing competition and ultimately less choice for consumers."