Its application to become the controlling shareholder of the Somerset-based bank has already been approved by the Financial Services Authority.

The lender had previously been linked to a bid for Northern Rock and offers a current
account mortgage, but the purchase of a bank represents a renewed attempt to enter the mortgage market.

Research conducted by Virgin Money over the past two years has show consumer demand for it to enter the banking market and that it would be a trusted deposit taker and mortgage lender. Virgin group founder Sir Richard Branson said the move was part of Virgin Money’s plans to bring simplicity to the UK banking market.

Jayne Anne Gadhia, chief executive of Virgin Money, said the acquisition was a strong and sensible first step in delivering its banking ambitions which would be founded on a sustainable, savings-based business.

She added: “The financial crisis has tarnished the reputation of many UK banks.
Virgin Money will provide a better, different form of banking to its customers, increasing competition in the sector.”

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David Batten, chairman of CHT, said: “The sale represents a good outcome for the business, its shareholders and its customers.”

Under the offer, CHT shareholders will be entitled to receive 509.2p in cash and
1.0294 contingent loan notes for each CHT share.

Mike Fitzgerald, sales director of The Emba Group, said: “All brokers are looking for a different approach to lending and this move could herald a new era. If Virgin Money gets it right, it could force existing lenders to raise their game. Virgin as a whole is still thought of as a young, vibrant brand and it has an opportunity to learn from where other lenders went wrong.”