Mortgage offset accounts are a popular feature of Australian home loans. The idea is simple: keep money in an account linked to your mortgage and that balance reduces the portion of your loan on which interest is calculated.
But a recent review by the Australian Securities and Investments Commission (ASIC) has highlighted an important issue: having an offset account does not necessarily mean it is working the way you think it is.
ASIC reviewed eight banks representing more than 70% of the Australian home loan market and found examples where offset accounts were not properly linked, monitored or delivering the savings customers had been promised.
For homeowners in Bunbury and across the South West, it is a timely reminder to check not only whether your offset is working correctly, but whether it is still the right home loan structure for you.
How Does a Mortgage Offset Account Work?
An offset account is generally a transaction account linked to your home loan.
If you owe $600,000 on your mortgage and have $40,000 sitting in a 100% offset account, interest is generally calculated on $560,000 rather than the full $600,000.
Your required repayment does not normally reduce, but because less interest is being charged, more of each repayment can go towards reducing the loan principal.
The key word, however, is linked.
What Did ASIC Find?
ASIC’s 2026 review found weaknesses in the way banks were setting up, monitoring and managing mortgage offset accounts.
Among the issues identified were banks struggling to locate customer requests to establish offsets, failing to detect when an account was not operating correctly, delays in fixing problems and a lack of clear information allowing customers to see whether the offset was providing the expected benefit.
ASIC also noted that refinancing or changing home loan products can sometimes cause an offset account to become disconnected from the loan.
The problem may not be obvious. Your mortgage repayment can continue as normal while you quietly pay more interest than expected.
Between September 2023 and August 2025, ASIC reported that banks paid more than $55 million in compensation relating to offset account failures.
The message is simple: don’t just assume your offset is doing its job.
Is Your Offset Account Actually Worth It?
Even when an offset account is linked and working perfectly, there is another question worth asking: are you getting enough value from it to justify the cost?
Loans with offset facilities can sometimes come with a higher interest rate, annual package fee, monthly account fee or a combination of these costs.
If you regularly keep a substantial balance in your offset, the interest savings may comfortably outweigh those costs. If your balance spends most of the month close to zero, however, you may be paying for a feature that provides very little benefit.
A loan with an offset account is not automatically better than a simpler home loan without one. The right option depends on your loan balance, the amount you keep in the account, the fees involved and how you manage your money.
What Are the Alternatives to an Offset Account?
Offset accounts are only one way of structuring a home loan.
Depending on your circumstances, a redraw facility may provide some of the flexibility you are looking for. Redraw allows you to make additional repayments into your home loan and, subject to the lender’s rules and loan conditions, access some of those extra repayments later.
Some borrowers may be better suited to a lower-rate basic home loan without package features. Others may prefer to split their lending between fixed and variable portions or make regular extra repayments.
There is no single structure that is right for everybody. The important thing is to compare the total cost of the loan rather than focusing on one feature in isolation.
This is also where speaking to your mortgage broker can be valuable. Rather than looking at an offset account as a standalone feature, a broker can look at your loan balance, savings habits, interest rate, fees and broader financial position to determine whether the structure still makes sense.
Time for a Home Loan Health Check?
If you already have an offset account, ASIC recommends checking that it is properly linked to your home loan and continues to work after any refinancing, product changes or loan variations.
Check your internet banking, loan statements or app. If you cannot clearly see how the offset is connected or whether it is reducing your interest, speak with your lender.
Your home loan may have been competitive when you first took it out, but rates, products and your own financial circumstances change over time. The features you needed three or five years ago may not necessarily be the features that suit you today.
At Ryo Finance, we can review your existing home loan, look at how your offset is being used and compare it with other structures and lenders available in the market.
Sometimes the answer will be to keep the offset account exactly as it is. In other situations, there may be a simpler or more cost-effective alternative.
Make Sure Your Home Loan is Working for You
Offset accounts can be valuable, particularly for borrowers who keep meaningful savings balances and want easy access to their money. ASIC’s findings are not a reason to abandon offset accounts, but they are a useful reminder that every feature on your home loan should be earning its place.
If you are unsure whether your offset is correctly linked, whether the savings outweigh the fees or whether another home loan structure might suit you better, speak with the team at Ryo Finance.
A review could help make sure the home loan you are paying for is actually working the way you expect it to.
What is a mortgage offset account and how does it work?
A mortgage offset account is a transaction account linked to your home loan. The money held in the account reduces the portion of your loan balance used to calculate interest. For example, if your home loan balance is $500,000 and you have $30,000 in a 100% offset account, interest is generally calculated on $470,000.
How do I know if my offset account is linked correctly?
You can usually check whether your offset account is linked through your online banking, banking app or home loan statements. If it is unclear, contact your lender and ask them to confirm the account is correctly linked and reducing the interest charged on your mortgage. It is particularly important to check after refinancing or changing home loan products.
Is an offset account always worth having?
No. An offset account can be valuable if you regularly maintain a reasonable balance, but some offset home loans come with higher interest rates, package fees or account fees. If you generally keep very little money in the offset, a lower rate home loan without an offset feature may potentially be more cost effective.
Is a redraw facility better than an offset account?
Neither option is automatically better. An offset account keeps your savings separate while reducing the interest calculated on your mortgage, while a redraw facility generally allows you to access additional repayments you have made into your loan, subject to the lender’s conditions. A mortgage broker can help compare the costs, flexibility and features of each option based on how you manage your finances.
