Lloyds has unveiled an innovative new scheme that will allow all consumers with a variable rate mortgage to overpay their mortgages by up to 20 per cent with no financial penalty.

The leading mortgage lender announced that the scheme will last for one year until March 31st 2011.

According to research conducted on behalf of the bank, about one in four consumers are already opting to overpay their mortgage.

Further to this, some 48 per cent explained that they were overpaying their mortgage to reduce the term of mortgage, while 22 per cent revealed they were overpaying to pay less interest over the term of the mortgage.

Stephen Noakes, commercial director of mortgages at Lloyds, stated that with rates at an all-time low there has never been a better time for the majority of people to overpay their mortgage.

He added: Customers have a choice to make to gain maximum advantage from the extra cash in their pocket.

Lloyds Banking Group was formed through the purchase of HBOS by Lloyds TSB in January 2009.