With Christmas fast approaching, homeowners may be rejoicing over the latest interest rate cut from the European Central Bank, which has reduced the cost of servicing a variable rate or tracker mortgage by 1 per cent, or about €120 per month, over the past few weeks.

However, borrowers who can afford to shouldn’t rush to spend this money in other ways. By using this extra money to pay down the principal element of your loan each month, you could cut the term of your mortgage by a couple of years, while also saving thousands in reduced interest payments.

Take for example someone with a €200,000 mortgage over 20 years, on a tracker mortgage interest rate of 4.55 per cent.

Instead of simply adding the €120 saved by interest rate cuts to the monthly shopping bill, by over-paying the mortgage by this amount the borrower could save themselves over €15,000 in interest payments, and knock two and a half years off the life of their mortgage – surely more appetising than a couple of extra bottles of champagne this Christmas?