CHRISTMAS has come early for thousands of former Northern Rock customers who are in line for a windfall following a landmark case - but the taxpayer must foot the bill.

Compensation will go to about 43,000 borrowers of the defunct bank - at an average of £6,300 each – after the High Court ruled against Northern Rock Asset Management (NRAM) over a wording glitch in loan documents.

The decision will prompt banks and industry watchdogs to double-check whether any other loans were incorrectly worded.

The case is expected to total £261m unless the group successfully appeals against the ruling.

A big chunk of the bill will be paid by the British taxpayer as the government part owns the assets of the failed bank.

The assets are now part of UK Asset Resolution (UKAR), which has offices in Sunderland and Bradford. UKAR chief executive Richard Banks said: "We are now considering the impact of the judgement and taking legal advice on whether to appeal.

"Customers do not need to act at this stage. If any redress becomes due, we will write to all those affected to advise on next steps," he added.

If the decision stands it will boost thousands of North-East households as a high percentage of Northern Rock customers were based in the region.

NRAM brought the legal claim against itself to test whether documents issued to customers under controversial Together Mortgages, which allowed customers to borrow up to 95 per cent of the value of their home, were incorrect and if compensation was owed.

The deal let people take out a loan at the same time as their mortgage, and then repay it at the same rate as their home loan. The offer proved attractive, but the High Court judge said paperwork relating to unsecured loans of between £25,000 and £30,000 - taken out between 1999 and 2008 - was incorrect and customers should be paid back interest and fees.

Customers were not given all the information in their statements that they were entitled to under the Consumer Credit Act, which meant that, technically, interest payments on their loans were not legally enforceable.

Newcastle-based Northern Rock was nationalised in 2008 following a run on its deposits which was one of the first signs of the impending global credit crunch.

Two years later it was split into a ‘good’ and a ‘bad’ bank, with the Northern Rock name transferred to the good bank.

At the end of 2011, Virgin Money bought the good part of the business and phased out the Northern Rock name.