Introduction
Offset accounts are often marketed as one of the smartest ways to save money on your home loan. But how do they really work? And with ASIC investigating whether some banks are failing to deliver the full benefit of offset accounts, many Australians are rightly asking: am I actually saving as much as I should?
For borrowers across Sydney, Melbourne, Brisbane, Perth, Adelaide, Hobart, Canberra, and Darwin, understanding how offset accounts function is essential to making the most of your mortgage.
What is an Offset Account?
An offset account is a savings or transaction account linked to your mortgage. The balance in this account “offsets” your loan, reducing the amount of interest charged each day.
Example:
- Loan balance: $500,000
- Offset balance: $50,000
- Interest charged only on $450,000
Over time, this can save you thousands in interest and help pay off your loan faster.
ASIC’s Probe into Offset Accounts
ASIC has recently stepped in to investigate lenders amid concerns that:
- Borrowers are not receiving the full offset benefit.
- Terms and conditions are unclear or misleading.
- Some offset accounts are only partial offsets (e.g. 50%), not full 100% offsets.
- System errors mean balances aren’t always applied correctly.
This probe underscores the importance of reviewing your mortgage regularly — and ensuring your bank delivers what they promise.
How Much Can You Really Save?
Let’s break it down with a practical example.
- Loan: $600,000 over 25 years at 5%
- Without offset: monthly repayments = $3,510
- With $50,000 in offset: interest charged on $550,000 → monthly repayment drops, saving approx. $200/month
- Over 25 years, this could add up to $60,000+ in interest savings
Capital City Insights
- Sydney: With some of the largest mortgages in the country, offsets are especially powerful.
- Melbourne: Highly competitive lender environment means more genuine 100% offset options.
- Brisbane: First home buyers benefit from offset accounts as they build equity faster.
- Perth: Growing property values make offsets ideal for equity management.
- Adelaide: Smaller loans still yield strong proportional savings.
- Hobart: Offsets help long-term owners reduce debt faster.
- Canberra: Stable incomes allow borrowers to keep larger offset balances.
- Darwin: Regional borrowers need to be mindful of whether their lender offers true full-offset features.
Common Misconceptions
- “All offset accounts are 100%.” Not true — some are only partial offsets.
- “Offset is always better than redraw.” Not necessarily — redraw can work well, but offsets offer more day-to-day flexibility.
- “Any money in offset saves interest.” Yes, but only if the account is structured correctly and fees don’t outweigh savings.
Real Client Story: Nathan in Brisbane
“I thought my offset was working, but my broker uncovered it was only partial. We refinanced to a full 100% offset with a 4.95% fixed rate. I now save over $220 a month and shaved years off my loan.”
How Brokers Add Value with Offset Accounts
- Compare 50+ lenders – ensuring the offset offered is genuine and cost-effective.
- Explain the fine print – many borrowers don’t realise their offset is only partial.
- Structure smarter – combining fixed/variable splits with offset for maximum savings.
- Review regularly – ASIC’s probe shows it’s essential to keep lenders accountable.
Risks of Not Reviewing Your Offset
- Paying more interest than necessary.
- Being stuck in a loan with hidden fees.
- Missing out on true 100% offset benefits.
- Overlooking cashback or sub-5% refinance offers.
Practical Tips for Borrowers
- Check your loan statement – is your offset balance fully reducing your interest?
- Ask about fees – ensure account-keeping charges aren’t wiping out savings.
- Review eligibility – some offsets only work on certain loan types.
- Engage a broker – to confirm you’re getting the full benefit.
📅 Book Your Free, No-Obligation Chat
At Money Tree Mortgage Brokers, we cut through the confusion around offset accounts. With access to 50+ lenders, we’ll confirm whether your account is truly saving you money — and if not, we’ll help you refinance to one that does.
Don’t let banks pocket what should be your savings.
