Here, we take a look why the deal is happening and how it will affect both Egg and Yorkshire customers….
Why is Egg being sold?
Egg was launched by Prudential in the late 1990s as a way for the insurer to profit from the growing popularity of online banking.
However, after a period of rapid growth, the online and telephone bank hit trouble and was eventually bought by Citigroup in 2007.
The US banking giant hoped to quickly return Egg to profit, but its plans were thrown off track by the financial crisis and it offloaded the bank’s credit card customers to Barclays earlier this year.
Why is Yorkshire Building Society buying Egg?
The deal to buy Egg’s savings and mortgage accounts marks a new stage in the growth of Britain’s second biggest building society, which has already tied up with smaller societies Chelsea and Barnsley and is currently awaiting approval for a merger with Norwich & Peterborough.
Kevin Mountford, head of banking at moneysupermarket.com said: "Yorkshire Building Society remains acquisitive and has expanded its multi-brand stable with the purchase of Egg's savings and mortgage businesses.
“This latest purchase should give the society even more options and ensure it remains competitive in the savings market.”
What does the deals mean for Egg customers?
Egg is currently offering just one instant-access internet savings account paying a measly 0.6% (before tax).
Savers in this account could therefore do much better by moving to Yorkshire’s current easy-access offering paying 2.1% (before tax) – although they can still find more generous deals elsewhere. Read Jessica Bown's recent article 'Easy access savings war hots up'.
If you have savings with Yorkshire, Norwich & Peterborough and Egg, remember that once the deal goes through, you will qualify for just one Financial Services Compensation Scheme (FSCS) limit of £85,000 for all your accounts with these providers.
Yorkshire has confirmed that savers will be able to move any balances above this limit penalty-free once the takeovers have happened.
Mountford said: "This acquisition is good news for current Egg customers, who will now be part of one of the country's largest Building Societies, giving them a higher degree of financial security.
“However, those who also hold Yorkshire or Norwich & Peterborough accounts will need to ensure their accumulated savings pots do not now exceed the FSCS limit.
“Savers should also use this as an opportunity to ensure they are getting the best rates available.”
The situation is currently much less clear-cut for Egg’s borrowers, particularly as the bank no longer markets mortgages.
While Yorkshire will keep the Egg name for existing customers in the short term, it is also not planning to actively promote the brand, suggesting that it will eventually be wound down.
Anyone with an Egg mortgage is therefore well advised to stay on top of any further developments.
What about Yorkshire’s customers?
As described above, savers with accounts with both Yorkshire and Egg or Norwich & Peterborough will have to check that the total balances do not exceed £85,000 – or £170,000 for joint accounts – if they want to continue benefiting from full FSCS protection.
Yorkshire has dominated the mortgage best buy tables in recent months, and the further injection of funds provided by the acquisition of Egg should only serve to increase its lending power.
Mountford said: “At a time when financial services institutions are required to strengthen their balance sheets, the boost provided by the £2.5bn savings and £430m mortgage books makes good commercial sense.”
How will it affect the market as a whole?
The upshot of Yorkshire buying Egg should be some attractive new deals for both savers and borrowers.
However, while the extra funding is likely to allow Yorkshire to offer better deals, its run of acquisitions has reduced the overall number of players in the marketplace.
"Whilst this consolidation means we should see some innovative new products, the question will be how this move affects the level of competition amongst providers," Mountford said.
Please note: Any rates or deals mentioned in this article were available at the time of writing.