Mortgage overpayment announcement "very encouraging"

A move by a UK lender to encourage mortgage holders to overpay on their loans has been described as "very encouraging".

According to Catherine Hearnden, director at MyMortgageDirect, the decision by Lloyds Banking Group to double its overpayment limit should be welcomed.

The organisation revealed that until March 31st 2011, all of its customers with variable-rate loans will be able to contribute more than the agreed amount by up to 20 per cent without incurring any financial penalty.

Responding to the development, Ms Hearnden said: "Anything that is going to help people repay mortgages rather than just pay the interest has got to be good."

She added that paying more on home loans means that if interest rates go up - as they are expected to - consumers have a lower balance and will therefore be less affected by the increases.

In addition, those who take advantage of Lloyds' arrangement will be able to shorten their repayment term, the expert noted.