A mortgage offset account can help reduce the interest you pay on your home loan. However, a recent ASIC review found that some Australian borrowers may be missing out on potential savings because their offset accounts were not properly opened, linked or maintained. ASIC reviewed eight major banks covering more than 70% of Australia’s home loan market and identified weaknesses in how some offset accounts were managed.
If you have a mortgage offset account, it is worth checking that it is correctly linked to your home loan and providing the interest savings you expect.
What Did ASIC Find About Mortgage Offset Accounts?
ASIC’s Report 837, Offsets, out of mind: Banks fall short on mortgage offset account promises, examined how eight banks set up, linked and managed mortgage offset accounts. The review covered 204,000 unique home loans and identified issues with how some banks:
- Recorded offset account requests
- Opened accounts
- Linked accounts to mortgages
- Monitored whether arrangements were working correctly
ASIC identified several types of offset account failures:
| Issue | Percentage |
|---|---|
| Offset account opened but not linked to home loan | 55% |
| Offset account requested but not opened | 22% |
| Offset linked outside the timeframe communicated | 14% |
| Other issues | 9% |
ASIC also found that some banks struggled to identify whether customers had actually requested an offset account. Some problems were only discovered after customer complaints or after ASIC began investigating.
How Does a Mortgage Offset Account Work?
A mortgage offset account is generally a transaction account linked to your home loan. The money held in the offset account reduces the portion of your mortgage balance used to calculate interest.
For example:
Assume you have:
- A $700,000 home loan
- $50,000 in your offset account
With a 100% offset facility, interest would generally be calculated as though your loan balance was:
$700,000 – $50,000 = $650,000
The $50,000 does not reduce the amount you owe on your mortgage. Instead, it reduces the amount used to calculate interest. This can help reduce total interest costs and may allow you to repay your mortgage sooner if your repayments remain unchanged.
Why Is Checking Your Offset Account Important?
The biggest issue is that your mortgage repayment may continue normally even if your offset account is not working correctly. This means you could continue making repayments while paying more interest than expected.
ASIC provided an example involving a couple with:
- A $750,000 mortgage
- $50,000 in their offset account
If the offset account was not linked correctly, ASIC estimated they could pay more than $3,000 in additional interest over one year. If the problem continued for the life of the loan, missed savings could potentially approach $230,000 and add four years to the mortgage term.
How to Check If Your Mortgage Offset Account Is Working
Check That Your Offset Account Is Linked
Log into your bank’s app or online banking and review your home loan details. Confirm that your offset account is clearly shown as linked to the correct mortgage. Do not assume that requesting an offset account means it was automatically connected. Always check that the account has been properly established and linked.
Check Your Interest Savings
Review:
- Recent home loan statements
- Transaction history
- Interest charges
If you have a significant amount sitting in your offset account but cannot see evidence that it is reducing your interest calculation, contact your lender.
Understand What Type of Offset Account You Have
Not all offset accounts work the same way.
Some mortgages offer:
- 100% offset accounts
- Partial offset accounts
With a 100% offset account, every dollar generally reduces the loan balance used to calculate interest by one dollar. A partial offset account may only provide benefits on a percentage of the balance. Review your loan documents so you understand exactly what type of offset facility you have.
Check Your Offset Account After Refinancing
This is especially important if you have recently:
- Refinanced
- Changed lenders
- Changed loan products
Changing your mortgage arrangement can result in your offset account becoming disconnected from your home loan. Do not assume an existing offset account will automatically transfer to a new loan. Always confirm that your offset account is still linked and working after refinancing.
Review Your Home Loan Statements Regularly
Many homeowners ignore mortgage statements once repayments are automated. However, reviewing statements can help identify issues early.
Check:
- Outstanding loan balance
- Interest charged
- Offset account balance
- Account fees
- Changes to loan products or interest rates
What If Your Offset Account Was Not Working?
If you discover that your offset account was not properly linked or was not operating as expected, contact your bank. Ask the lender to investigate:
- When the offset account was opened
- When it was linked to your mortgage
- Whether it was disconnected
- Why it was not working
- Whether additional interest was charged
- Whether compensation may apply
ASIC reported that banks had already paid more than $55 million in customer compensation for offset account failures reported between September 2023 and August 2025.
What Can Cause an Offset Account to Stop Working?
Problems can occur during:
- Initial setup
- Account linking
- Ongoing account management
One common trigger is changing your home loan. Refinancing, switching loan products or restructuring your mortgage can affect the connection between your loan and offset account. Always check your offset account after:
- Refinancing
- Changing lenders
- Changing loan products
- Consolidating loans
- Restructuring your mortgage
- Opening a new offset account
Don’t Assume Your Offset Account Is Free
A mortgage offset account can save interest, but it is not always the cheapest home loan option.
Some lenders charge:
- Higher interest rates
- Package fees
- Offset account fees
An offset account may not provide value if:
- You keep only a small balance
- The loan has significantly higher fees
- The interest rate is higher than comparable loans without an offset
Before choosing an offset mortgage, compare:
- Interest rate
- Annual fees
- Package fees
- Offset account fees
- Expected offset balance
- Redraw facility options
Mortgage Offset Account vs Redraw Facility
Both options can help reduce mortgage interest, but they work differently.
Offset Account
- Linked to your home loan
- Balance reduces the amount used to calculate interest
- Money generally remains accessible
Redraw Facility
- Extra repayments are made directly against your mortgage
- Access depends on lender rules
Neither option is automatically better.
The right choice depends on:
- Your circumstances
- Loan features
- Access requirements
Common Mortgage Offset Account Mistakes
Avoid these common mistakes:
Assuming Your Offset Account Was Linked
Always confirm the account is connected to the correct mortgage.
Forgetting After Refinancing
Check your offset account after changing lenders or loan products.
Using the Wrong Account
Only money held in the linked offset account reduces mortgage interest.
Ignoring Statements
Regularly review interest charges and loan balances.
Overlooking Fees
Understand whether you have a 100% or partial offset account and what fees apply.
What Does ASIC Recommend?
ASIC recommends homeowners ensure their offset account:
- Has been set up correctly
- Is linked to the correct home loan
- Is providing expected interest savings
If you cannot confirm this through your bank app or statements, contact your lender.
Final Thoughts
Having a mortgage offset account does not automatically guarantee that you are saving money. ASIC’s review highlights the importance of checking that your offset account is:
- Correctly opened
- Properly linked
- Delivering the expected interest savings
A quick review of your account could help prevent unnecessary interest costs.
Frequently Asked Questions
What is a mortgage offset account?
A mortgage offset account is a transaction account linked to a home loan. The balance reduces the amount of the mortgage on which interest is calculated.
Why is ASIC warning homeowners about offset accounts?
ASIC found weaknesses in how some banks set up, linked and managed offset accounts, causing some customers to pay more interest than expected.
How do I know if my offset account is working?
Check your banking app, online banking or statements to confirm the offset is linked correctly and reducing your interest charges.
Can refinancing affect my offset account?
Yes. Refinancing or changing loan products can result in an offset account becoming disconnected from the mortgage.
Is a 100% offset account better?
A 100% offset generally provides a greater interest benefit because the full balance offsets the home loan. However, interest rates and fees should also be considered.
Can I receive compensation if my offset account was not working?
Potentially. If a bank failed to provide the offset arrangement promised and you suffered financial loss, contact your lender and request an investigation.
How Can We Help?
If you have any questions or would like further information, please contact Camden Professionals on:
Phone: 08 9221 5522
Email: info@camdenprofessionals.com.au
You can also arrange a meeting so we can discuss your requirements in more detail.
General Advice Warning
The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any person.
Any advice contained on this page and on this website is General Advice and does not consider any person’s particular investment objectives, financial situation and particular needs.
Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances.
The examples provided on this page and on this website are for illustrative purposes only.
Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Camden Professionals, its officers, representatives, employees, and agents disclaim all liability except for any liability which by law cannot be excluded, for any error, inaccuracy or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.
Recent Comments