Australians losing out on millions in offset savings due to bank errors
Updated . First published at
Australian homeowners are being urged to check their mortgage accounts after it was revealed that banking system errors have stripped millions of dollars in interest savings from unsuspecting borrowers.
A major investigation by the Australian Securities and Investments Commission (ASIC) has found eight major Australian banks paid out $55 million in compensation to impacted customers over a two-year period to August 2025.
Australians could be missing out on millions in mortgage offset savings, an ASIC investigation has found. iStock
The corporate watchdog uncovered systemic shortcomings in how offset accounts were established and maintained, including failure to action customer setup requests, incorrect account linking, and inaccuracies in calculating interest offsets.
Offset accounts have become one of the most popular home loan features across Australia.
According to Reserve Bank of Australia (RBA) data, 55 per cent of all home loans now feature an offset facility, with a record $349.1 billion stashed in these accounts nationwide.
Balances in offset accounts have surged by 53 per cent since the RBA initiated its aggressive rate-hiking cycle in 2022, as households attempt to shield themselves from rising repayments.
Analysis from comparison site Canstar shows that offset accounts save Australian borrowers an estimated $61 million every single day in avoided interest charges.
An average owner-occupier holding a $600,000 mortgage with 25 years remaining and an average interest rate of 6.26 percent, with $50,000 sitting in offset, stands to save over $157,000 in interest and shave off more than four years on their loan.
However, thousands of households could be missing out on these critical savings due to bank admin errors.
Canstar Data Insights Director Sally Tindall said the watchdog’s findings were extremely concerning.
“Australians love a good financial hack, and for borrowers, offset accounts are right there at the top of the list,” Tindall said.
“For many customers, it’s one of the most powerful tools borrowers have to reduce the amount of interest they pay on their mortgage, but only if it’s working as intended.”
“Customers trust their bank to apply interest charges correctly on what is typically their biggest monthly expense. Banks need to have robust processes in place to make sure they’re doing this correctly in all circumstances.”
Tindall warned that years of hard work building up cash reserves could be undermined if an account is not properly linked.
“The report is a disappointing but important reminder that borrowers shouldn’t assume everything is ticking along in the background,” she said.
“When you’ve spent years building up savings in your offset, the last thing you want is for those dollars to be sitting in an account that’s not actually reducing your interest bill.”
“If you’re one of the 55 per cent of mortgage customers utilising an offset account, check you’re not getting overcharged by your bank.”
Borrowers are being urged to double-check their offset accounts. Dominic Lorrimer
How to check if offset account is linked properly
To make sure accounts are working properly, borrowers can log into their banking apps to verify that their offset accounts are explicitly marked as linked to their main home loan.
It is also worth doing the maths yourself. Here’s how to do a rough estimate:
Estimate your daily interest charge by subtracting your offset balance from your overall loan amount to find your net balance.
Divide your annual interest rate by 365 to calculate the daily percentage rate, which can then be multiplied by the net balance to calculate expected daily interest charges.
Tindall said that borrowers who picked up any discrepancies should contact their bank immediately with their calculations, as lenders are legally required to respond to formal complaints within 30 days. If unresolved, complaints can be escalated free of charge to the Australian Financial Complaints Authority (AFCA).
The news comes as Australian households brace for potential further interest rate hikes, following a stern warning on Tuesday from Reserve Bank Governor Michele Bullock.
Speaking at the Anika Foundation fundraising lunch in Sydney, Governor Bullock said underlying inflation is still “too high” and signalled that the central bank was prepared to hike interest rates further if needed.
If the RBA does increase the cash rate target to 4.60 per cent at its next meeting, it would take it to the highest setting since 2011.
Share a tip-off, video or photo with us
