Key takeaways
Offset accounts are widely used. Around 55 per cent of Australian mortgages have one, with more than $349 billion held in these accounts.
The savings can be substantial. Holding $50,000 in offset against a $600,000 mortgage could save more than $157,000 in interest and shorten the loan by over four years.
Offset account errors have cost borrowers millions. An ASIC investigation found $55 million was paid in compensation for problems involving offset accounts in the two years to August 2025.
Borrowers should check their account is linked correctly. Review the loan in your banking app and compare the interest charged with a rough calculation of your net loan balance.
For millions of Australian borrowers, an offset account has become an important part of managing a mortgage.
Salaries are paid into it, savings accumulate there and household spending flows through it, all with the expectation that every dollar sitting in the account is quietly reducing the interest charged on the home loan.
However, a recent investigation by the Australian Securities and Investments Commission and reported by Canstar has shown that borrowers can't always assume this feature is operating as intended.
Across eight banks examined by the regulator, customers received $55 million in compensation for problems involving offset accounts in the two years to August 2025.
The shortcomings included accounts that had not been linked correctly, offsets that had not been requested or established properly, and interest charges that were not being reduced as they should have been.
Why offset accounts matter so much
Offset accounts are no longer a niche banking feature as around 55 per cent of Australian mortgages now have an offset account, with approximately $349.1 billion held in them.
That represents a record 13.2 per cent of outstanding housing credit.
Since the interest rate rising cycle began in 2022, the amount Australians hold in offsets has increased by 53 per cent, as borrowers have looked for practical ways to reduce the financial pressure of higher mortgage costs.
The basic concept is simple...
If you owe $600,000 on your home loan and hold $50,000 in a correctly linked offset account, the bank should generally calculate interest on a net balance of $550,000.
You still owe the full $600,000, and the $50,000 remains accessible, but the interest saving can compound over time.
The potential savings are significant
According to Canstar’s calculations, a borrower with a $600,000 mortgage, 25 years remaining and $50,000 consistently held in an offset could save more than $157,000 in interest and repay the loan more than four years earlier, assuming an interest rate of 6.26 per cent remains unchanged.
Across the country, Canstar estimates the money held in offset accounts is collectively saving Australians around $61 million in interest every day.
These figures highlight how powerful an offset account can be, although the benefit depends on two things: the account must be functioning correctly, and the borrower must not be paying too much for the privilege of having it.
How to check your offset is working properly
The first step is to check that the offset account is clearly shown as linked to the correct mortgage through your bank’s app or online portal.
Calling the lender and asking for written confirmation may also be worthwhile, particularly if you have refinanced, restructured your loans, changed loan products or opened additional accounts.
Borrowers should then perform a rough interest calculation rather than relying entirely on the bank’s systems.
Start by subtracting the average offset balance from the mortgage balance, then multiply that figure by the annual interest rate and divide by 365 to estimate the daily interest charge.
Because balances and repayments change throughout the month, the result will only be approximate, but it should help identify any major discrepancy.
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For example, Canstar estimates that a $600,000 loan with $50,000 in offset and a 6.26 per cent interest rate would attract roughly $94 in interest per day, or approximately $2,830 over a 30-day month, before allowing for principal repayments.
If the amount charged is materially different, the borrower should ask the lender to explain the calculation.
As Canstar data insights director Sally Tindall points out, borrowers should not assume everything is “ticking along in the background”.
She recommends checking both the account linkage and the interest calculation, with a mortgage broker or accountant able to assist where the figures are unclear.
Are you paying too much for the feature?
There is another issue many borrowers overlook.
An offset account can save interest, but some lenders attach higher interest rates, package fees or annual account fees to loans offering this feature.
If the balance held in the offset is relatively small, the additional loan cost may exceed the interest saving.
However, competition has improved this situation with Canstar reporting that 45 per cent of lenders now offer offset accounts with their lowest advertised variable rates, while several lenders provide the feature without additional monthly or annual fees.
This means borrowers should assess the entire loan package rather than assuming an offset automatically makes a mortgage more competitive.
If your calculations suggest you have been overcharged, raise the matter formally with the bank and provide your figures.
Canstar notes that a lender generally has 30 days to respond to a formal complaint.
Borrowers who remain dissatisfied can escalate the dispute to the Australian Financial Complaints Authority, which offers independent assistance at no charge.
The bottom line
There is nothing new here - good financial management requires more than choosing the right products at the outset.
Loans, interest rates, account structures and personal circumstances change, so the arrangements that suited you several years ago may no longer provide the same value today.
An offset account remains one of the most useful mortgage management tools available to Australian homeowners and investors.
Used properly, it can reduce interest, shorten the loan term and preserve access to savings.
A few simple checks today could protect years of future savings and ensure your money is working as hard as you believe it is.
