Nationwide Building Society is planning a £2.9billion deal to buy Virgin MoneyIt would create the second-biggest UK banking entity after Lloyd's  We look at how it could affect mortgages and savings customers

Nationwide Building Society has agreed terms to buy Virgin Money in a potential £2.9billion deal.

If the deal goes through, the combined group will control total assets of more than £366billion and be the second largest provider of mortgages and savings in the UK.

It would see Nationwide remain a building society, the mutual said, but with an expanded range of products and services and greater scale and financial strength.

Virgin Money is the sixth largest retail bank with 6.6million customers, who may now be wondering what the news means for their savings accounts and mortgages.

Here is everything you need to know about what the deal means for you.

Combination: Nationwide Building Society to create one of Britain's biggest banks with Virgin Money UK takeover

Will anything change immediately?

If the deal is completed, Nationwide is seeking to integrate Virgin Money gradually over multiple years into the Nationwide group.

The reality is that in the short term, most savers and borrowers would see no practical change for some time.

The first thing to note is that the deal still has to be accepted by Virgin Money's shareholders.

James Blower, founder of Savings Guru said: 'Given the offer is a 38 per cent premium on the share price, this will take some time. In the short term, nothing will change for savers and borrowers at all.'

A spokesperson from Virgin Money added: 'As this is a preliminary agreement, it's worth emphasising there are no changes for any Virgin Money customers at this stage, and they can continue to access and use their products and services with Virgin Money as normal.'

Longer-term changes

If the acquisition goes ahead, Nationwide intends that the Virgin Money brand will be retained in the medium term.

As part of its longer-term integration strategy, Nationwide has agreed with Virgin Enterprises that it will cease to retain the Virgin Money brand over a six-year period from the completion of the potential acquisition, by which point Nationwide intends to have re-branded the Virgin Money business.

David Hollingworth, director of broker L&C Mortgages said: 'As a result there's unlikely to be any significant change to the separate offering of Virgin Money following the acquisition, and it looks more likely to take time.

'There is of course likely to be reshaping within that six year timeframe and product offerings may alter, but in the medium term it looks as though it could be steady as it goes.'

How will it affect your mortgage?

Both brands are set to continue for some time to come, so they are likely to keep offering separate products in the near term.

Borrowers have nothing to worry about and their mortgage will continue as normal, David Hollingworth said.

He continued: 'Virgin Money has been very competitive in the mortgage market and shown itself more than capable of going toe-to-toe with the major high street banks.

'At times it has shown an ability to bring a different way of thinking to the market and sought to innovate in its product options.

'It also has a solid heritage in being able to take a more flexible approach for the right customers, to help borrowers that may be a little outside the standard high street offerings.

'That expertise will hopefully appeal to Nationwide, rather than risk the gradual demise of the more individual approach that can be available through Virgin's Clydesdale mortgage brand in particular.'

James Blower added: 'The combined group will have better scale so it could lead to improved rates and better competition, if the combined group decides it wants to become the nation's leading mortgage provider. But we are probably a year away from seeing that.'

Nationwide's statement on the deal seemed optimistic that the deal could lead to better rates for customers.

Nationwide's Chairman, Kevin Parry, said: 'The combination would put Nationwide in a position to [...] offer rates for mortgages and savings that are, on average, better than the market average.'

How will it affect your savings?

Nothing will change immediately for customers who have Virgin Money savings accounts. However, becoming part of a larger entity could be bad news for them further down the line, one expert told This is Money.

James Blower said: 'In the medium term, I expect it will not be great for savers. The combined group will only be behind Lloyd's Bank in size, and big banks don't offer the best rates.

'Virgin Money has offered some very competitive deals, it has the best one-year Isa and has done for some time. But I can't see that continuing as the cost of funds will be more important for the larger group, so I foresee lower rates for Virgin savers going forward.'

Initially, Virgin Money will have to continue as part of Nationwide but with separate licences.

Blower added: 'Nationwide then needs to decide whether to integrate or run it stand-alone. If they integrated, there will be a period of time before it went from two banking licences to one.

'The regulator may also say that savers over £85,000 in the combined group have to be given the option to break or switch, penalty free, to get back within FSCS limits.'

What has Virgin Money said about the deal?

Chairman of Virgin Money David Bennett said: 'The board of Virgin Money is pleased that Nationwide recognises the considerable strengths and opportunities that exist across our business, with the potential acquisition delivering attractive value for our shareholders.

'We are confident that a combination would support an exciting new chapter for Virgin Money to benefit from Nationwide's scale and ambition.'

What has Nationwide said about the deal?

Chairman of Nationwide Building Society Kevin Parry said: 'A combination with Virgin Money would accelerate Nationwide's strategy and create a stronger, and more diverse, modern mutual.

'The combination would increase Nationwide's scale and financial strength, put us in a stronger position to continue to provide Fairer Share Payments to eligible Nationwide members, and offer rates for mortgages and savings that are, on average, better than the market average.'