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Financial experts urge those with tracker mortgages to overpay to save money

Those with tracker mortgages should use the Bank of England's recent rate cuts and future expected cuts, as an opportunity to overpay on mortgage payments, according to banking group HSBC.

Tracker mortgages follow the Bank of England base rate. Consumers holding a tracker mortgage have seen their mortgage repayments fall dramatically over the past four months.

What experts at HSBC are saying is that tracker mortgage holders should keep repaying their mortgage at the same rate as four months ago as this would potentially take years off their mortgage term.

'Overpaying their mortgage could reduce its term by years and save them thousands of pounds in interest,' said Martijn van der Heijden, head of mortgages at HSBC.

A similar recommendation has come from mortgage price comparison site It says that people approaching retirement would especially benefit from overpaying their mortgage rather than saving, because of low interest rates.

Lloyd's TSB estimates that if rates remain at 1.5% throughout 2009, a consumer who has continued to pay off their mortgage at the same amount since interest rates starting dropping in December 2007 will end up taking 12.5 years off their mortgage term.

Last month the Bank of England cut interest rates to 1.5%, the lowest level in over 300 years, and further cuts are widely predicted by economists.