Following last week's cut in interest rates down to a rock-bottom 3%, some lucky homeowners on a tracker rate or Standard Variable Rate mortgage deal will soon find themselves with extra cash available. In today’s economic climate it’s essential to make the most of these new-found savings, according to Stephen Noakes, marketing director at Lloyds TSB Mortgages. He said: "We would encourage homeowners to use this opportunity to reassess their financial situation and take action by addressing outstanding debts, protecting the equity in their home or growing a nest egg."

Five top tips for making the most of your mortgage savings

1. First, address any outstanding debt, such as store or credit cards. Always focus on those with the highest APR first.

2. Set up a standing order on pay day to sweep additional cash into a savings account. As you’ve already been paying it you should not miss it.

3. You may want to use your new nest egg to make overpayments on your mortgage and reduce the size of your loan. Some lenders, like Lloyds TSB, will allow you to make up to 10% overpayments per year.

4. Research from Lloyds TSB shows that one in ten mortgage holders is saving specifically to help them adjust to a higher mortgage rate environment when their current mortgage deal expires.

5. In a falling house price environment it’s important to protect the equity in your property. If your monthly mortgage payments are currently on an interest-only basis you may want to consider including an element of capital repayment.

Compare the best mortgage rates here and savings rates here

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