From Friday, Lloyds TSB customers with variable rate mortgages were able to increase their monthly payments by up to 20% without incurring any financial penalty.

The move marks a doubling of the previous overpayment limit, and will last for one year, coming to an end on March 31, 2011.

But why is overpaying on your mortgage such a good idea? And which other lenders allow you this level of flexibility? Read on to find out.

The low interest rate environment of the last couple of years has reduced the amount millions of mortgage borrowers with variable-rate deals have to pay each month.

Overall, mortgage payments accounted for 32% of average post earnings in the fourth quarter of 2009, Lloyds says, down from almost half, or 47%, in the last three months of 2007.

This means that the amount of disposable income customers have left after tax has increased by 15 percentage points over the last two and a half years, and statistics show that many of those people making savings are choosing to use the extra cash to pay down their mortgage debt more quickly.

Stephen Noakes, commercial director of mortgages at Lloyds, said: "The average mortgage repayment has dropped by around £188 per month. And those on tracker mortgages have done even better - on average they are just over £400 a month better off.

"Our research shows that a number of our customers are not banking the reduction in their interest payments, but are actually using that to pay down their mortgages, which is a very positive move."

Being mortgage free is a long-term dream for many homeowners. And overpaying on your mortgage can help you to achieve that position over a shorter timeframe, which is one of the main reasons people use any extra money they have to increase their mortgage payments.

Recent research conducted for Lloyds showed that around one in four consumers questioned are already choosing to overpay their mortgage. And of those already overpaying, almost half were taking that approach to reduce the term of their home loan.

Minimising the amount of time you have a mortgage is not the only reason to overpay, though. You can also significantly reduce the amount of interest you pay over the life of the loan by increasing your payments, even if you can only afford to repay a small amount more than necessary.

On a £100,000 mortgage at a rate of 3.5%, for example, overpaying by just £50 per month will reduce the term of a mortgage by three years and six months, as well as save a customer £14,576, £7,557 of which is interest.

A further potential benefit is cushioning yourself from any sudden jump in your mortgage payments should rates start to rise again, as they eventually will do.

Noakes added: "Not only can it help customers shave interest off their mortgage, it also means less of a payment shock should interest rates begin to move back up."

Not all mortgage lenders allow you to overpay, however. Short-term fixed and variable-rate deals often impose penalties on those who overpay, so it is worth switching to a more flexible deal if you are keen to reap the benefits of overpaying - and can do so without incurring penalties.

Competitive mortgage deals that offer the chance to overpay include first direct's term tracker at 2.39%. The deal has an arrangement fee of just £499 and, like many term trackers, does not impose any early repayment charges - leaving you free to overpay by as much as you like at any time.

The one downside, however, is that only those with a deposit of 35% or more qualify for the deal.

Other flexible options include Market Harborough building society's term tracker at 2.48%, with a £1,845 fee and a deposit requirement of 25%, and Leek United building society's discount remortgage deal at 2.95%, a fee of just £195, no early repayment charges and a minimum deposit of only 15%.