The company will be entirely rebranded to Virgin Money but there will be no change to its intermediary operations.
The Treasury says the sale was in the best interests of the taxpayer, secures the long-term future of the company and will increase competition in the banking sector. It does not include “bad bank” Northern Rock Asset Management.
Chancellor George Osborne says: “The sale of Northern Rock to Virgin Money is an important first step in getting the British taxpayer out of the business of owning banks.
“It represents value for money; will increase choice on the high street for customers; and safeguards jobs in the North East.”
According to the Treasury, Virgin Money has agreed to make no further compulsory redundancies, besides those already announced, for at least three years from completion of the deal.
The new owners will retain and expand the total number of branches, extend support for the Northern Rock charitable foundation for another year, and make Newcastle its operational headquarters.
Ron Sandler, executive chairman of Northern Rock, says: “The return of Northern Rock to the private sector has always been one of our key objectives.
“We said that this would be done at the right time and when there was a proposition in the best interests of taxpayers and other stakeholders.”
The government says the sale will not affect current customers of Northern Rock.
The Treasury expects around £50m of cash within six months of completion of the deal.
According to the terms of the deal, a further £150m will be paid in a capital instrument and an additional cash consideration of £50-80m could be paid upon a future profitable initial public offering or sale in the next five years.