Is your mortgage offset account actually reducing your interest?

1. What ASIC's 2026 offset review actually found

ASIC reviewed offset arrangements at eight Australian banks covering more than 70% of the home-loan market. It identified weaknesses in how accounts were set up and monitored. Banks reported paying more than A$55 million in customer compensation for offset failures reported between September 2023 and August 2025. That figure describes the regulator's reported review period; it does not mean every offset customer is owed a refund.

In the bank-identified failure cases analysed by ASIC, the main categories were accounts opened but not linked (55%), accounts not opened (22%), links made later than promised (14%) and other failures (9%). Those percentages describe the identified failures, not the share of all mortgage customers affected. ASIC also noted weaknesses in the quality of banks' underlying records, so they should not be treated as a national failure rate.

ASIC's practical message is to check the actual link and the interest benefit rather than assuming that a visible transaction account must be working. Its 2026 review and consumer checklist explain the risks.

2. Check your offset in five steps

Step A — identify the exact mortgage and offset account

Open your loan contract or product schedule and locate the loan account number, offset eligibility, any percentage offset (for example, 100% versus partial), applicable limits and package charges. Then locate the transaction account that is supposed to offset that loan. A regular savings account is not automatically an offset account.

Step B — look for a live account-to-loan link

In online banking, check the mortgage details or offset section for the linked account number. Some banks display the relationship and estimated interest saved; others do not. If you cannot see the link, request written confirmation from the lender of the effective linking date, linked mortgage, offset percentage and whether the link remains active.

Step C — compare a dated interest period

Use your statements to record the loan principal, offset daily balances, interest rate and interest charged for a chosen period. Ask the bank for the exact daily calculation used, including any interest-rate changes, timing of deposits, excluded balances or partial-offset terms. Monthly repayment amounts may remain unchanged even when an offset is functioning correctly.

Step D — recheck after any product change

Refinancing, switching loan products or changing account arrangements may require the bank to relink the offset. Ask for written confirmation after settlement or product conversion. Do not assume the old account number continues to offset the new loan automatically.

Step E — compare the value of the feature

Even a correctly linked offset may not be economical if it requires a higher mortgage interest rate or annual package fee. Compare an offset-eligible loan with a genuinely comparable no-offset offer, including rate differences and account fees, before treating gross interest savings as net savings.

3. Calculate a rough interest shortfall without overstating it

For a genuine 100% offset, a simple illustration is eligible average offset balance × annual mortgage rate × days / 365, capped so the eligible balance does not exceed the mortgage balance. This is a directional estimate, not a bank statement reconciliation. A real lender may use actual daily balances, a different day-count basis and variable rates.

If a fully eligible A$50,000 balance had not been offset for 90 days at a constant 6% rate, the simple difference is about A$740 (50,000 × 0.06 × 90 ÷ 365). That does not prove you are owed A$740: the bank may have linked the account for part of the period, balances may have fluctuated or the loan may have different contractual rules. Request the bank's calculation for the precise dates.

For a separate feature-cost decision, suppose a lender charges A$395 more annually for an offset package and the offset loan's rate is 0.15 percentage points higher on an unchanged A$750,000 balance. The simple extra annual cost is A$395 + A$1,125 = A$1,520. At a hypothetical 6% mortgage rate, an average eligible balance of roughly A$25,333 would be needed to offset that cost in a one-year simple-interest comparison. This ignores principal amortisation, rate changes and daily fluctuations; it is not a market rate quote.

Estimate your own offset savings → The calculator models a constant average balance and one additional annual fee. It does not automatically include a higher loan-rate premium, so calculate that separately when comparing packages.

4. Do not confuse an offset account with redraw

In an offset account, your money remains in a linked transaction account and reduces the principal used to calculate eligible interest. With redraw, you have already made extra repayments against the loan and may be able to withdraw some of them under your lender's rules. Access restrictions, fees and interest treatment can differ. ASIC's Moneysmart guidance explains the distinction.

For an investment property, redraw and offset transactions may also have different Australian tax consequences. A redraw used for private spending can affect interest deductibility. Do not infer tax treatment from this simple savings model; ask a registered Australian tax adviser to review the loan purpose and records.

5. What to ask your bank if the figures do not add up

Ask the bank to confirm in writing: (1) the account number linked to the mortgage; (2) the effective linking date and any interruptions; (3) the eligible offset percentage and any cap; (4) the daily interest method; (5) the corrected interest calculation for the affected dates; and (6) whether any fee or interest adjustment is due. Keep the contract, monthly statements, screenshots and correspondence together.

If the response does not resolve the issue, make a formal written complaint through the lender's internal dispute resolution process. State the affected dates, what you believe went wrong and the remedy requested. If you remain dissatisfied, the Australian Financial Complaints Authority (AFCA) provides independent dispute resolution for eligible complaints against member firms. Check AFCA's eligibility and time limits; the Moneysmart complaints guide describes the steps. Neither ASIC's review nor this article guarantees compensation.

Frequently asked questions

My repayment did not fall. Does that mean the offset failed?

No. On many principal-and-interest loans, scheduled repayments stay the same while more of each repayment reduces principal when interest falls. Confirm the actual interest calculation rather than relying on the repayment figure.

Is a 100% offset the same as 100% of my savings earning mortgage interest?

No. A qualifying offset balance reduces the principal on which loan interest is calculated. It does not usually pay separate savings interest, and the eligible amount cannot exceed the linked loan balance for this simple model.

Can I use an annual average balance to claim a refund?

Not by itself. The average-balance formula is only a screening estimate. Your bank's daily ledger, the contract, the dates of any missing link and the applicable rate determine whether a correction is due.

Should I cancel the offset if my balance is small?

Not automatically. Compare the actual fees and interest-rate premium against realistic average savings and consider your need for flexible access to cash. A redraw facility may have different access conditions.