The reduction in VAT announced in the government''s pre-Budget report yesterday could help people pay off their mortgages more quickly, according to Fool.co.uk.

In response to the news that VAT will be reduced by 2.5 per cent, the personal finance website suggests that the average family could save up to £42 a week.

David Kuo, head of personal finance at Fool.co.uk, notes that this sum could have a not insignificant effect on a household''s mortgage repayments.

"For instance overpaying a typical £180,000 mortgage at an interest rate of 7.5 per cent by as little as £42 a month will shorten the mortgage term by as much as two years. It will also slash the interest bill by almost £22,000 over 25 years."

The Chartered Institute of Taxation also revealed yesterday that the cut to 15 per cent will save those earning less than £20,000 around £2.50 a week.

Get mortgage advice direct from an advisor