The court judgment said around £258m could be paid out partly by taxpayers, more than Northern Rock's estimates, as the government now owns Northern Rock Asset Management, the part of the bank that made the loans.
Despite bringing the legal claim against itself in the hope of confirming its opinion that customers with loans of more than £25,000 were not entitled to compensation, NRAM is considering whether to appeal the ruling.
The Financial Ombudsman Service has received about 300 complaints over the last few years relating to NRAM mortgages, from borrowers both above and below the £25,000 threshold.
Northern Rock was sold to Virgin Money in 2008, and its assets are now part of UK Asset Resolution (UKAR).
Richard Banks, Chief Executive Officer of UKAR, commented:
“We brought this case to the High Court because we are determined to act in full accordance with the law and do the right thing for both customers and taxpayers.
"We are disappointed by the decision because no detriment has been suffered by customers.
"We are now considering the impact of the judgment 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.”
NRAM have already set aside around £270m to compensate customers who had borrowed up to £25,000, because documents were wrongly worded under the terms of the Consumer Credit Act.
Northern Rock has also previously acknowledged that it sent letters to customers with loans above this amount that incorrectly told them they were covered by the Act.
In its annual report, the organisation estimated a maximum £240m payout if it was ordered to compensate those borrowers with loans of more than £25,000.
