Research by comparison site MoneySupermarket.com found that a homeowner paying the average standard variable rate of 4.38% could shave almost £10k off a £100k mortgage in three years just by overpaying £250 per month

Over three years, they would repay an additional £9,600, reducing the overall mortgage balance to just £75,277.

This would also help reduce the amount of interest due over the remaining term of the mortgage. Without overpayments the outstanding balance would be £84,877 after three years.

If the homeowner chose to put the £250 into a savings account each month paying an average market rate of 0.45%, they would earn just £313.58 in gross interest over three years. After tax, this would equate to £252.86 for basic rate taxpayers or £188.15 for higher rate taxpayers.

The benefits are even more significant for those overpaying for a longer term, the report said.

Over the course of a 15 year term, overpaying £250 per month would save a staggering £12,242 in interest alone and shave four years and eight months (56 months) off the term of the mortgage, meaning the homeowner can fully pay off the mortgage in just over ten years.

By putting the £250 into a savings account paying the average 0.45%, the homeowner would end up with a total balance of £47,335.56 after 15 years – earning just £2,335.65 in interest during this period.

If they then paid off their mortgage early and put the mortgage payments they would have been making into a savings account once the mortgage ends then they would have savings worth a total of £57,103.06 by the time their mortgage would have ended.

By comparison, if the homeowner saved £250 into a savings account paying a market average rate of 0.45%, they would end up with a total balance of £47,335.56 after 15 years – earning just £2,335.56 in interest during this period.

Therefore by opting to overpay on a mortgage instead of paying into a savings account, the homeowner would be £22,010 better off over 15 years.

Clare Francis, mortgage expert at MoneySuperMarket said: “With interest rates set to remain low for at least the next three years, it’s a great time for mortgage borrowers. Not only can they benefit from the lowest mortgage rates in history, but they can also reduce the negative impact of low savings rates by channelling spare cash into the mortgage instead. Regular overpayments will help reduce the amount you owe, reduce the amount of interest you will pay over the term, and lead to you being mortgage free sooner.

“However, overpaying on a mortgage won’t be the right option for everyone so it’s important to think about the implications beforehand. While the benefit of keeping the money in a savings account may not be as great from an interest perspective, as least you retain easy access to that cash in case of an emergency. Once you’ve overpaid on your mortgage, while not impossible, it is much harder to get at that money again. Opting for an offset mortgage can be a good way around this as you can benefit from overpaying while being able to get at your savings at any time.

“Also, one other thing to bear in mind if you are thinking of overpaying on your mortgage is that most products limit the amount you can overpay by, so make sure you check this before you alter your monthly payment.”