You Have an Offset Account. But Have You Checked That It’s Actually Linked to Your Mortgage?

For many Australian homeowners, an offset account is one of the simplest tools available for reducing mortgage interest.

You keep your savings in the account. The balance is offset against your home loan. You are charged interest on a smaller amount.

Simple.

Except ASIC has found that, for some borrowers, the account they thought was saving them money was not operating as expected at all.

ASIC's review of eight banks found weaknesses in how mortgage offset accounts were set up, linked, monitored and managed. Those banks represented more than 70% of Australia's approximately $2.5 trillion home loan market.

Banks have already reported paying more than $55 million in compensation for offset account failures reported to ASIC between September 2023 and August 2025.

And ASIC expects further remediation.

Perhaps the most concerning statistic is this:

55% of the offset failures identified by banks involved an offset account that had been opened but was not actually linked to the mortgage.

In other words, simply seeing an account called "Offset" in your banking app may not be enough.

The real question is:

Is your offset account actually reducing the interest charged on your home loan?

That is a question worth checking.

Why ASIC's Mortgage Offset Warning Matters Again

ASIC originally released the findings of its mortgage offset review in July 2026.

But the issue returned to the spotlight on 4 September 2026, when ASIC Chair Sarah Court highlighted the review during an appearance before the Parliamentary Joint Committee on Corporations and Financial Services.

ASIC again pointed to weaknesses in how banks managed offset accounts and confirmed that more than $55 million had already been paid in compensation, with further remediation expected.

That makes this more than an old banking story.

It is a timely reminder for Australian mortgage holders to check that a feature they may be relying on for tens of thousands of dollars in long-term interest savings is functioning correctly.

First, How Does a Mortgage Offset Account Actually Work?

A mortgage offset account is generally a transaction account connected to an eligible home loan.

Instead of earning interest on the money sitting in the offset account, the balance reduces the portion of the mortgage on which interest is calculated.

For example:

Suppose you have a $750,000 home loan and maintain $50,000 in your offset account.

If the offset is functioning correctly, interest should generally be calculated as though the mortgage balance were $700,000, rather than $750,000.

Your required repayment may remain unchanged.

The benefit is that less of that repayment goes towards interest and more can effectively go towards reducing the loan balance.

Over a long loan term, the difference can become substantial.

But there is one critical condition:

The account needs to be properly linked to the correct loan.

If it isn't, the money may simply be sitting in a transaction account while your lender continues calculating mortgage interest on the full loan balance.

Australians Have $349.1 Billion Sitting in Offset Accounts

This is not a niche banking feature.

ASIC reported that Australians held approximately $349.1 billion in mortgage offset accounts as of March 2026.

That amount had increased by approximately 28% in only two years.

ASIC also noted that almost 3.3 million Australian households have a mortgage.

These numbers help explain why offset-account administration matters so much.

Even relatively small errors can become extremely expensive when repeated across large mortgage balances and long loan terms.

And unlike an incorrect transaction fee that might be immediately visible on a statement, an offset failure can be difficult for borrowers to notice.

Your repayment can continue being debited normally.

Your loan can continue appearing normal.

Your offset account can continue holding your money.

Yet you may quietly be paying more interest than expected.

What Exactly Did ASIC Find?

ASIC examined the offset-account practices of eight major banking institutions.

Its review identified four broad areas of concern.

Banks sometimes struggled to readily identify whether customers had requested an offset account.

Detection systems for identifying offset failures were inconsistent.

Some customers were not compensated promptly when problems were discovered.

And borrowers sometimes had insufficient visibility over whether their offset arrangements were operating correctly.

ASIC reviewed data relating to 204,000 unique home loans settled between 1 March and 31 August 2025.

One particularly concerning finding was that some banks could not easily determine whether borrowers had requested an offset account.

Others had to reconstruct information manually.

ASIC warned that this difficulty makes the full scale of the problem difficult to estimate.

55% of Identified Failures: Account Opened, But Not Linked

ASIC broke down the offset failures identified by banks into several categories.

The largest category was striking.

55% involved an offset account being opened but not linked to the mortgage.

Another 22% involved the offset account not being opened at all.

A further 14% involved accounts being linked later than the timeframe communicated to customers.

The remaining 9% involved other types of failures.

For borrowers, the message is straightforward:

Having an offset account and having a functioning offset arrangement are not necessarily the same thing.

How Much Could an Offset Failure Cost?

ASIC provides a useful hypothetical example.

Imagine borrowers with:

Mortgage: $750,000
Average offset balance: $50,000

The offset account was requested but failed to link correctly to the mortgage.

According to ASIC's example, the borrowers could pay more than $3,000 in additional interest in just one year.

If the failure remained undetected for the life of the loan, ASIC estimated those borrowers could miss out on almost $230,000 in interest savings and potentially spend an additional four years repaying the mortgage.

That is why this issue matters.

An offset-account problem may not cost someone $10 today.

It can quietly change the mathematics of a mortgage over decades.

Why Can Offset Problems Be So Difficult to Notice?

The problem is partly caused by how offset accounts work.

An offset usually does not reduce the contractual repayment that leaves your account every month.

Instead, it reduces the amount of interest being calculated.

That means your repayment may appear exactly the same whether the offset is functioning or not.

The difference happens behind the scenes.

When the offset works correctly, more of your repayment can contribute toward reducing the mortgage rather than servicing interest.

If it isn't working, you may simply pay additional interest without an obvious warning appearing in your everyday banking.

ASIC Chair Sarah Court described this as a form of hidden harm because repayments can continue normally while customers unknowingly pay more interest.

Refinancing? This Is Particularly Important

One of the most practical findings from ASIC's work concerns borrowers who have changed their mortgage.

ASIC specifically warned that common changes such as refinancing or switching home loan products can result in an offset account becoming disconnected from the loan.

That means borrowers should consider checking their offset arrangement whenever they:

refinance to another lender, change loan products, restructure their mortgage, split their loan, change account arrangements, or make other significant changes to their home lending.

Do not automatically assume that because an offset worked before a refinance or restructure it remains correctly connected afterwards.

How Can You Check Whether Your Offset Is Working?

ASIC recommends borrowers actively verify their offset arrangement rather than assuming everything has been set up correctly.

Start by checking your lender's mobile app, internet banking or mortgage statements.

Look for evidence that the offset account is explicitly connected to the correct home loan.

If you have multiple mortgage accounts, splits or investment loans, make sure you understand which loan the offset is actually attached to.

You should also determine whether your lender provides visibility of the interest-saving benefit.

If that information isn't available or isn't clear, contact the lender directly and ask them to confirm that the account is correctly linked and receiving the intended offset benefit.

And if you have recently refinanced or changed loan products, consider checking again.

Don't Just Ask, "Do I Have an Offset?"

A better question may be:

"Can you confirm exactly which loan account this offset is linked to and that the balance is currently being used when calculating my mortgage interest?"

That distinction matters.

Borrowers often focus on whether an offset feature appears within their loan package.

But the real financial value comes from the actual connection between the transaction account and mortgage.

An Offset Account Is Not Automatically the Best Option Either

ASIC's findings shouldn't be interpreted as meaning every homeowner needs an offset account.

Whether an offset feature provides good value depends on your circumstances.

Some mortgages offering offset facilities may have:

higher interest rates, annual package fees, monthly account fees or other costs compared with simpler loan products.

Moneysmart recommends considering whether the savings generated by the offset justify those additional costs.

For example, someone who regularly keeps $50,000 or $100,000 in an offset may receive materially different benefits from someone whose balance usually remains close to zero.

This is why comparing home loans purely by headline interest rate can also be misleading.

The loan structure and the way you actually use it matter.

Offset Account vs Redraw: They Are Not the Same Thing

Another common source of confusion is the difference between an offset account and a redraw facility.

Both can potentially reduce mortgage interest, but they work differently.

An offset account is generally a separate transaction account linked to the mortgage.

Money placed into a redraw facility generally represents additional repayments already made against the home loan.

The accessibility, ownership and rules around those funds can therefore differ.

For some borrowers, an offset may offer useful flexibility.

For others, paying for an offset feature may not produce enough benefit to justify the cost.

The right structure depends on the loan, the lender and how the borrower manages their money.

What Should You Do If Something Looks Wrong?

If you believe your offset account has not been operating correctly, the first step should generally be contacting your lender.

Ask them to investigate:

whether the account was opened when requested, whether it was linked to the correct loan, when the link became active, whether interest was calculated correctly during the affected period, and whether any remediation or compensation may be applicable.

ASIC has made clear that customers should not be expected to discover these failures themselves.

Banks are expected to identify problems, address them and appropriately compensate affected customers.

What Can a Mortgage Broker Help With?

A mortgage broker cannot replace the lender's responsibility for correctly administering an offset account.

However, a broker can help borrowers look at the bigger lending picture.

That can include reviewing whether an existing mortgage structure still makes sense, comparing loans with and without offset features, understanding lender fees, assessing refinancing options and considering whether the features being paid for actually suit the borrower's financial behaviour.

For borrowers who have had the same mortgage for several years, this can also be a useful reminder to review more than simply the offset account.

Interest rates, lender products and personal circumstances can all change.

A loan that suited you several years ago may not necessarily remain the most appropriate structure today.

The Bigger Lesson From ASIC's $55 Million Warning

The most important takeaway isn't that offset accounts are bad.

Quite the opposite.

Used correctly, an offset can be a powerful way to reduce mortgage interest while retaining access to cash.

The problem is assuming that a feature is working simply because it appears to exist.

Australians now have approximately $349.1 billion sitting in offset accounts.

Banks have reported more than $55 million in compensation relating to offset failures.

And among the failures identified by banks, more than half involved accounts that had been opened but were not linked to the mortgage.

That makes a two-minute check worthwhile.

Open your banking app.

Find your offset.

Check the loan it is connected to.

And if you can't clearly verify the relationship, ask your bank.

Because an offset account can only save you mortgage interest if it is actually offsetting your mortgage.

Want to Review Your Home Loan Structure?

At LNO Mortgages, we help Australian home buyers, homeowners, investors, self-employed borrowers and business owners understand their lending options and structure their finance around their broader goals.

If you're unsure whether your current loan features still suit your circumstances, are considering refinancing, or want to compare your existing mortgage with alternative lending structures, we can help you review your options.

A mortgage isn't only about obtaining a competitive rate.

The way the loan is structured, including features such as offset accounts, can also have a meaningful impact over time.

Speak with LNO Mortgages about reviewing your current home loan and lending structure.

Data Sources

The primary source for this article is ASIC Report 837 and ASIC's 29 July 2026 mortgage offset review, which covered eight banks representing more than 70% of Australia's approximately $2.5 trillion home loan market. ASIC reported more than $55 million in customer compensation and approximately $349.1 billion held in mortgage offset accounts as of March 2026.

ASIC again highlighted the issue during the Parliamentary Joint Committee on Corporations and Financial Services on 4 September 2026, confirming that remediation remains an active consumer issue.

Additional consumer guidance comes from ASIC's Moneysmart mortgage offset account guidance, updated in July 2026.

This article provides general information only and does not constitute financial, credit, tax or legal advice. Loan features, eligibility, fees, interest rates and potential benefits vary between lenders and borrowers. Consider your circumstances and seek appropriate professional advice where required.