Is Your Mortgage Offset Account Working? ASIC Finds $55m in Failures
Offset accounts can reduce mortgage interest and may help borrowers repay a home loan sooner. ASIC’s July 2026 review shows why Australian homeowners should confirm that the account is properly opened, linked to the correct loan split and delivering the benefit promised.
What did ASIC find about Australian mortgage offset accounts?
On 29 July 2026, the Australian Securities and Investments Commission published the results of a targeted review into the way banks establish, link, monitor and manage mortgage offset accounts.
The regulator examined eight banks representing more than 70 per cent of Australia’s home-loan market. Reports made to ASIC between 1 September 2023 and 31 August 2025 showed that banks had paid more than $55 million in customer compensation for offset-account failures, with further remediation expected.
ASIC reviewed information relating to 204,000 unique home loans settled between March and August 2025. The concern was not simply that isolated mistakes occurred. Some institutions could not readily confirm whether a customer had requested an offset, whether the account was linked correctly or whether a failure had been identified and corrected.
The Australian Banking Association said more than 99 per cent were operating as intended. The practical lesson is that borrowers should still verify the exact account link and interest benefit instead of relying only on the account label.
How should a mortgage offset account work?
An offset account is a separate transaction account connected to an eligible home loan. The money remains available for everyday use, but the lender generally subtracts the eligible offset balance from the home-loan balance before calculating interest.
Most home-loan interest is calculated daily. The amount held in the offset—and how long it remains there—can therefore affect the interest charged each day.
A simple offset illustration
A $600,000 mortgage with an average $50,000 balance in a correctly linked 100 per cent offset would generally have interest calculated as though the balance were approximately $550,000. At 6 per cent, the rough first-year interest difference is about $3,000 before daily balance movements, loan amortisation, fees and rate changes.
The required repayment may not fall. Instead, less of each repayment may be absorbed by interest and more may reduce principal. Over time, this may reduce total interest and potentially shorten the effective repayment period.
Offset features are not free in every case. Some loans charge package or account fees, while some offset-enabled products may have a higher rate than a basic loan. The expected benefit should be compared with the total product cost.
The four bank weaknesses identified by ASIC
ASIC grouped its concerns into four broad areas. Each one creates a practical reason for homeowners to confirm their own offset arrangement.
Offset requests were not always easy to identify
Some applications relied on manual forms and manual linking. Seven of the eight reviewed banks used manual processing for at least some setup or re-linking requests.
Failures were not consistently detected
ASIC reported that 77 per cent of the identified failures had not been found by the banks before the regulator requested the data, although one bank accounted for most cases.
Corrections and compensation could be slow
Even where a potential issue was known, some problems were not promptly fixed or remediated. ASIC described a process flaw that remained incompletely resolved for about two years.
Customers lacked clear information
Some borrowers were not adequately told that changing a loan could remove the offset link or that a separate request might be required to connect it again.
ASIC said 55 per cent involved an offset account being opened but not linked, 22 per cent involved the account not being opened, 14 per cent involved linking outside the timeframe communicated to the customer and 9 per cent involved other issues.
Signs your mortgage offset arrangement needs checking
The exact account link is not visible
Your app shows an offset account and a mortgage but does not clearly identify which loan account or split receives the interest benefit.
Your loan structure recently changed
You fixed part of the mortgage, split the loan, refinanced, switched products, changed account numbers or completed another variation.
The interest does not look reasonable
You maintained a meaningful balance but cannot identify an interest pattern that reasonably reflects the offset balance and loan rate.
The lender cannot explain the setup
Staff cannot promptly confirm the effective date, eligible loan split, offset percentage or how the benefit appears in your statements.
How to complete a mortgage offset health check
ASIC recommends checking that the offset has been set up, is connected to the correct home loan and is providing the promised interest benefit. The following process turns that guidance into a practical borrower review.
Identify the exact offset account
Record the account name, BSB and account number rather than relying only on the label in the banking app.
Identify the loan split
Confirm which exact loan account receives the benefit, especially where the mortgage has multiple splits.
Check full or partial offset
Confirm what proportion of the account balance is eligible to reduce the interest-bearing loan balance.
Confirm the effective date
Compare the link date with settlement, account opening and any later loan changes.
- Review recent interest charges.
Compare the loan balance, average offset balance, applicable rate and the interest charged. A rough estimate can reveal a material discrepancy. - Recheck after every major change.
Repeat the review after fixing, splitting, refinancing, switching products, changing account numbers or completing a loan variation. - Keep written evidence.
Save application documents, product summaries, emails, screenshots and written confirmations showing the requested arrangement.
Why split loans and fixed rates require extra checking
A split home loan can combine variable and fixed components or separate owner-occupied and investment purposes. The structure may be useful, but it creates more places for the offset to be connected incorrectly.
Consider a mortgage with a $450,000 variable split and a $150,000 fixed split. If the borrower expects a full offset against the variable portion but the account is linked to the fixed split—or a split that does not accept an offset—the practical benefit may be reduced or absent.
Questions to ask before changing a loan
- Will the existing offset remain linked to the variable split?
- Will the loan account number or offset account number change?
- Does the lender require a separate re-linking request?
- When will the new link become effective?
- How will the link appear in online banking and the loan documents?
How to estimate whether your offset is reducing interest
A rough screening calculation can help identify whether a more detailed review is warranted.
Rough annual interest-saving estimate
This is only a screening estimate. Actual mortgage interest is commonly calculated daily and affected by changing balances, repayments, rates, loan terms and product rules.
| Average eligible offset balance | Illustrative rate | Rough annual interest difference | Important qualification |
|---|---|---|---|
| $10,000 | 6.00% | About $600 | Before fees, rate changes and daily balance movements. |
| $25,000 | 6.00% | About $1,500 | A sustained average balance is required for the full approximation. |
| $50,000 | 6.00% | About $3,000 | The required repayment may remain unchanged even though interest should reduce. |
| $100,000 | 6.00% | About $6,000 | Actual results depend on daily calculations and the eligible loan balance. |
A material difference between this rough estimate and your interest pattern does not automatically prove an error. It does justify requesting a clear explanation and detailed calculation from the lender.
What to ask your lender if something looks wrong
Do not rely only on a verbal statement that the offset is working. Retain the lender’s written explanation with your mortgage records.
What if the lender does not resolve the offset problem?
Begin with the lender’s internal dispute resolution process. Clearly identify the loan, offset account, affected period, suspected problem and the outcome you are requesting.
Lodge a formal complaint
Ask for a complaint reference number and retain all documents.
Request the calculation
Ask the lender to explain any interest adjustment or compensation amount.
Review the outcome
Check the dates, balances, rates, fees and account-link information.
Escalate where eligible
Unresolved complaints may be lodged with the Australian Financial Complaints Authority.
AFCA provides a free external dispute resolution service for eligible consumers and small businesses. Complex or high-value matters may also justify independent legal, accounting or financial advice.
Offset account versus redraw: they are not the same
| Feature | Offset account | Redraw facility |
|---|---|---|
| Where the money sits | In a separate transaction account linked to the mortgage. | As extra repayments made directly into the loan. |
| How interest may reduce | The eligible account balance reduces the loan balance used for interest calculations. | Extra repayments directly reduce the outstanding loan balance. |
| Access | Generally accessed like transaction-account money, subject to account terms. | Access depends on lender redraw rules, limits, timing and loan terms. |
| Possible costs | Package fees, account fees or a higher product rate may apply. | Some products restrict redraw or charge fees. |
| Investment considerations | Keeping cash separate may be useful, but individual tax advice is essential. | Redrawing for private purposes may create tax complexity for an investment loan. |
The more suitable structure depends on the borrower’s objectives, spending behaviour, loan purpose, tax position, product fees, interest rate and need for flexible access to cash.
Is a mortgage offset account still worth having?
ASIC’s findings do not mean offset accounts are inherently unsuitable. A correctly operating offset can be valuable, particularly where the borrower has a large mortgage and maintains a consistent savings balance.
Moneysmart says an offset may be worth considering where the borrower has a substantial loan, keeps regular savings and values flexible access to money. It may offer less value where the balance remains low and the product charges higher fees or a higher interest rate.
Compare the full home-loan package
The presence of an offset account should not be assessed in isolation. Compare the expected interest benefit against the rate, comparison rate, fees, eligible loan splits and alternative products.
- Interest rate and comparison rate
- Package and account fees
- Full or partial offset benefit
- Realistic average savings balance
- Eligible loan accounts and splits
- Alternative basic loan options
How a mortgage broker can help review an offset structure
A mortgage broker can help borrowers examine the intended loan structure and compare it with their current objectives. This may include reviewing the interest rate, fees, fixed and variable splits, offset eligibility, repayment type and whether refinancing could create a genuine overall benefit.
A broker can also help document the intended offset arrangement during an application and request confirmation from the lender after settlement or a product change.
Review the current structure
Identify which splits are fixed or variable and which account is intended to offset which loan.
Compare the total cost
Assess the rate, fees and features rather than focusing only on whether the loan includes an offset.
Prepare for loan changes
Check what should happen to the offset when fixing, splitting, refinancing or switching products.
Request written confirmation
Help the borrower ask the lender to confirm the setup, eligible split and effective link date.
A broker does not operate the lender’s internal systems and cannot guarantee that every internal setup or historical interest calculation is correct. A suspected failure must be investigated and remediated by the lender.
Mortgage offset account questions from Australian homeowners
How can I tell whether my mortgage offset account is linked correctly?
Check your lender's online banking or mobile app for the offset account number and the exact home-loan account or split it is linked to. If the link is not displayed clearly, ask the lender to confirm it in writing and confirm the date from which the offset benefit has applied.
Can an offset account become unlinked after settlement?
Yes. ASIC warned that loan changes such as refinancing, switching products, fixing part of a loan or making other in-life changes may require the offset account to be linked or re-linked. Check the arrangement after every material loan change.
Will my repayment fall when money is added to an offset account?
Not necessarily. Many principal-and-interest loans keep the required repayment unchanged. A working offset generally reduces the interest charged, allowing more of the repayment to reduce principal and potentially shortening the effective repayment period.
What is the difference between a 100 per cent and partial offset?
A 100 per cent offset generally reduces the interest-bearing loan balance by the full eligible offset balance. A partial offset only applies a stated proportion. The exact benefit depends on the product terms, eligible loan split and lender calculations.
Does an offset account work with a fixed-rate home loan?
It depends on the lender and product. Some fixed-rate loans do not offer an offset, while others may offer a partial or restricted offset. Confirm the exact product rules before fixing a loan or changing a loan split.
How much could an offset account save?
A rough first-year estimate is the average offset balance multiplied by the home-loan interest rate. For example, an average $50,000 balance at 6 per cent is approximately $3,000 in annual interest avoided before allowing for daily balance changes, fees, rate movements and amortisation.
What should I do if I think my offset has not been working?
Contact the lender, request confirmation of the setup and ask for a full review of the affected period. Request a written explanation showing the relevant dates, account balances, interest rates, interest adjustment and any compensation calculation.
Can I complain to AFCA about an offset account problem?
If the issue is not resolved through the lender's internal dispute resolution process, eligible consumers can lodge a complaint with the Australian Financial Complaints Authority. AFCA provides a free external dispute resolution service for financial complaints.
Is an offset account always better than redraw?
No. Offset and redraw work differently. An offset is a separate transaction account, while redraw involves extra repayments made directly to the loan. Access rules, fees, rates, tax considerations for investment purposes and borrower behaviour can affect which structure is more suitable.
Can a mortgage broker check my offset account?
A broker can help review the intended loan structure, compare costs and features, check documentation and ask the lender to confirm the account link. A broker does not control the lender's internal systems and cannot independently audit every historical interest calculation.
Official sources and further reading
This Capital Connections Finance article is an original borrower guide based on the regulator’s findings and supporting public information. It does not reproduce the news report.
- ASIC — Hidden mortgage offset failures costing Australians millions in lost interest savings
- ABC News — Mortgage borrowers miss out on millions in offset savings due to bank failures
- Reserve Bank of Australia — Developments in Banks’ Funding Costs and Lending Rates
- Moneysmart — Mortgage offset accounts
- Australian Financial Complaints Authority — Credit, finance and loan complaints
Review your offset account before hidden interest costs accumulate
Arrange an obligation-free discussion with Capital Connections Finance to review your rate, loan structure, offset feature and refinancing options. Support is available in Nepali, English, Hindi and Punjabi for eligible borrowers across Australia.