The lender said this would apply to mortgage customers on fixed or tracker deals.

Customers making lump sum overpayments over £1,000 will have their monthly repayments recalculated, whereas for those making overpayments less than that amount, their repayments won’t change.

The latter could mean that they have a lower balance to refinance when it comes to a new fixed term.

The lender will write to customers making regular monthly overpayments which are more than £500 per month or use eight to 10 per cent of their annual overpayment allowance to inform them to the changes.

A NatWest spokesperson said: “We regularly review mortgage policy and propositions to ensure we are meeting the needs of our customers.

“Early next month we’ll be supporting mortgage customers on a fixed or tracker deal by increasing the overpayment limit from 10 per cent to 20 per cent of the outstanding balance.”

What about other lenders?

YourMoney.com contacted the other major banking groups to find out what their current overpayment policies are, and to see if they will be changing the thresholds in light of NatWest’s move.

Here’s what they told us:

Barclays: “Most Barclays mortgages (including fixed and tracker) let customers make overpayments of up to 10% of the mortgage balance in every 12-month period. Customers on fixed rates can also make an overpayment of up to 90% of their mortgage balance in the last 90 days of their fixed-rate period, without incurring an Early Redemption Penalty (ERC).

“Customers on fixed rates can also fully redeem their mortgage in the last 30 days of their fixed-rate period, without incurring an ERC. Terms and conditions may vary depending on the mortgage product – customers should check their mortgage documents for details of their overpayment limits and early repayment charges.”

HSBC: “Overpayments are unlimited for those on a Tracker or SVR mortgage. Our current annual overpayment allowance is 10% for those on a fixed rate. There are no current plans to change this, although we do keep our policies under review.”

Lloyds Banking Group: “Borrowers with a product that has an ERC, such as a two- or five-year fixed rate for example, can overpay by 10%  (of the amount owed on 1 Jan) annually without penalty. Customers on products without an ERC are not limited by how much they can overpay (without paying the mortgage off in full).”

Nationwide: “Nationwide has no plans to change its overpayment limits as we already allow borrowers with a fixed rate mortgage the option to pay up to 10% each year and this is based on the original loan amount, not the remaining balance. Those with tracker mortgages are able to overpay an unlimited amount on their mortgage each year. ”

Santander: “We offer our fixed rate mortgage customers the option to repay as little as £10 extra a month to up to 10% of their outstanding mortgage balance each calendar year, without paying an Early Repayment Charge (ERC). This can be done either as a regular monthly amount or as a one-off payment. In the past six months, we’ve seen more people look to manage their future repayments through overpaying on their current mortgage, which can reduce the size of the mortgage balance more quickly.”