Do you use an offset account to save money on your mortgage? It might be a good idea to contact your bank and check it has actually been set up and is working as it should.
That’s according to a report released on Wednesday by the corporate watchdog, the Australian Securities and Investments Commission (ASIC).
ASIC’s review of eight banks – accounting for more than 70% of the Australian home loan market – found “weaknesses” in how all of them “set up, monitored and managed offset accounts, resulting in some customers missing out on promised savings”.
Across the entire banking sector, ASIC says Australian banks have paid out more than A$55 million in compensation for offset account failures reported between September 2023 and August 2025.
Reserve Bank data show 55% of Australian mortgages – representing an estimated 1.8 million households – have an offset account.
According to ASIC, in March, Australians held a total of $349.1 billion in offset account balances, up 28% over two years. The watchdog’s findings raise concerns some aren’t getting the savings they’ve been promised.
As my recent research has explored, even when operating as intended, these products can be difficult to navigate as a consumer and won’t save everyone money.
How does an offset account work?
An offset account is a type of bank account linked to a mortgage.
Instead of earning interest, the savings in the offset account reduce the interest payable on your mortgage balance.
To give a simplified example, if you owe $1 million on a mortgage, but also have $100,000 in a linked offset account, the bank will only calculate interest based on an effective balance of $900,000.
It might seem like an easy way to save money, but there are some important caveats. First, many banks charge customers to open or operate an offset account, or impose other costs such as higher interest rates on a linked mortgage.
Second, they won’t be a good deal for everyone. Savings depend on a household’s ability to save and the specific costs of the product.
James Ross/AAP
Why the regulator is concerned
Across eight banks, ASIC reviewed 204,000 home loans that were settled between March and August 2025.
Among various types of offset account failure identified, the two most common were banks not opening an offset account when it had been requested, or an account being opened but not linked to the mortgage. Manual errors by staff were identified as the main cause of account failures.
Overall, the report identified four overarching concerns, finding some banks:
- struggled to “readily identify” offset account requests
- did not consistently detect failures
- were slow to fix issues or failed to compensate customers
- did not consistently provide customers with “clear, timely information” about their offset accounts.
These findings are particularly concerning where a customer has opted to use an offset account instead of another type of account that pays interest. If their offset account hasn’t been linked correctly, they are missing out on both mortgage interest savings and the benefit of using another savings mechanism.
Not for everyone
My own recent research examined who uses offset accounts in Australia, and how much of a benefit they actually receive.
I found mortgage holders are only likely to benefit from an offset account if they can save enough money – after mortgage payments and other expenses – that the mortgage interest savings outweigh the ongoing fees associated with the account.
For example, at a 6% mortgage interest rate, a customer would need to hold at least $5,000 in their offset account for an entire year to justify a $300 annual fee.
Customers with lower mortgage interest rates or less ability to save may not be getting value for money from their offset account. Put simply, while some mortgage holders might save money, others might be incurring fees for little gain.
Checking your account
ASIC has encouraged anyone with a mortgage offset account to check:
- whether it has actually been set up
- that it is linked to the right home loan
- that it is saving interest.
Actual savings will vary significantly by product and by bank. For that reason, it can be difficult to offer a simple formula everyone can use to check they’re saving money.
But if you have concerns, you can contact your bank or mortgage broker.
ASIC’s report serves as a warning that these mortgage products can be difficult to navigate and may not be suitable for everyone. As always, it’s a good idea to seek professional financial advice about your mortgage options, products and decisions.
Disclaimer: This article provides general information only and does not take into account your personal objectives, financial situation, or needs. It is not intended as financial advice.
