Virgin money could pose a serious threat to other UK mortgage lenders if its plans to take over Northern Rock and 600 Lloyds Banking Group branches come to fruition.

Lloyds has been told by the European Union that it has to sell at least 600 of its branches, accounting for 19 per cent of its total mortgage portfolio of £341billion. This follows the government's bailout of the bank after the crash of 2008.

Virgin group chairman Sir Richard Branson is believed to have set aside a £3billion fund to buy both the Lloyd's branches and Northern Rock. A deal to buy the Lloyds branches alone would make Virgin Money the sixth biggest high street lender in terms of branch numbers.

Emba group sales and marketing director Mike Fitzgerald said: "Consumers are crying out for a change and the brand has serious consumer appeal and trust, which has to be good news for banking.

A Virgin spokesman said: "Virgin has an opportunity to have national reach in terms of a branch network almost overnight and that is something that has not been possible until now."