Could your offset account be costing you money?
Thousands of Australian mortgage holders have been paying more interest than they should because their offset accounts weren't properly set up or linked to their home loans, according to a review by the Australian Securities and Investments Commission (ASIC). Banks have so far paid more than $55 million in compensation, with further payouts expected as lenders continue reviewing affected customers.
An offset account is a transaction account linked to your home loan. The money in the account reduces the balance on which your lender calculates interest. For example, if you owe $600,000 on your mortgage and have $50,000 in your offset account, you'll generally only pay interest on $550,000.
If an offset account isn't correctly set up or linked to your home loan, you could end up paying thousands of dollars more in interest than necessary without even realising it.
Australians held $349.1 billion in offset account balances as of March 2026, with balances increasing 28% over the previous two years.
What did ASIC find?
ASIC reviewed eight lenders, AMP, ANZ, CBA, Credit Union Australia (now Great Southern Bank), HSBC, ING, Macquarie and Westpac, which together account for more than 70% of Australia's $2.5 trillion home loan market. As part of the review, the regulator examined more than 204,000 home loans settled between March and August 2025 to assess how offset accounts were set up, linked and managed.
The review found that some lenders failed to correctly set up or manage offset accounts, leaving borrowers paying more interest than they should. In many cases, the problems weren't discovered until months or even years later.
The regulator identified three main types of failures:
- Offset accounts were opened but never linked to the home loan (55%) – This was the most common issue. Although customers had an offset account, their savings weren't reducing the loan balance used to calculate interest.
- Offset accounts requested by customers were never opened (22%) – Some borrowers believed they had an offset account, but it had never been created, meaning they missed out on the interest savings they expected.
- Offset accounts were linked later than promised (14%) – In these cases, borrowers eventually received the benefit of their offset account, but only after paying extra interest while waiting for it to be activated.
Why did these errors happen?
ASIC found many of the problems occurred during manual processes, particularly after a loan had already settled.
Borrowers were most at risk when making changes to an existing home loan, such as:
- requesting a new offset account after settlement;
- refinancing to a new lender or loan product; or
- switching from a fixed-rate to a variable-rate home loan.
In these situations, bank staff often had to manually update information across multiple systems. ASIC found these manual processes increased the risk of errors, preventing some offset accounts from being opened or correctly linked to a customer's home loan.
Why are these mistakes so difficult to spot?
Unlike a missed repayment or a failed direct debit, an offset account that isn't working properly doesn't usually trigger an obvious warning. Your regular mortgage repayments stay the same, even though you're paying more interest than you should and reducing your loan balance more slowly.
ASIC Chair Sarah Court said this is what makes offset account failures particularly difficult to spot. Customers may unknowingly lose out on interest savings for months or even years, while also missing the opportunity to put that money towards other financial goals.
Court said borrowers shouldn't have to discover for themselves that an offset account hasn't been working as promised. She also noted that some banks only identified problems after ASIC began asking questions, raising concerns about how effectively lenders were monitoring their own systems.
How to check your offset account
If you have an offset account, especially if you've refinanced, switched home loans or made changes to your loan in recent years, it's worth checking that everything is working as it should.
ASIC recommends checking that:
- your offset account exists and is active;
- it's linked to the correct home loan;
- your offset balance is reducing the interest charged on your loan.
If you can't confirm this through your lender's app or online banking, it can be a good idea to contact your lender and ask them to verify that your offset account has been correctly linked.
What can you do if something looks wrong?
If you think your offset account isn't working properly, don't sit with the feeling but take action. Contact your lender as soon as possible and ask them to investigate whether your offset account has been correctly set up and linked to your home loan.
If an error has caused you to pay more interest than you should have, ask your lender whether you're entitled to compensation or a refund of the additional interest charged.
If you're not satisfied with your lender's response, or the issue isn't resolved within a reasonable timeframe, you can lodge a complaint with the Australian Financial Complaints Authority (AFCA).
