Your offset account might not be working. Here is how to check.

How would I even know if my offset wasn’t working properly? It’s a fair question. Because if your offset account has been quietly failing to reduce your interest, the bank hasn’t been ringing to tell you. ASIC’s just confirmed that.

Last week ASIC released the findings of its review into offset accounts across four major lenders. The regulator looked at how these accounts have been set up, administered and disclosed, and what it found is uncomfortable reading for anyone who assumed their offset was doing its job. More than 750,000 customers were affected by errors and failures across those four lenders alone, with around $18 million already paid back in remediation and more expected. The problems ranged from offsets not being linked properly to the home loan, to interest being calculated incorrectly, to customers being sold offsets that never made financial sense for them in the first place.

If you have an offset account, this is worth paying attention to. Not because you need to panic, but because the assumption most borrowers make (that the bank is quietly getting it right in the background) turns out to be shakier than it should be.

What an offset is actually meant to do

An offset account is a transaction account linked to your home loan. The balance sitting in that account is subtracted from your loan balance before the bank calculates interest for the day. So if you owe $500,000 on your loan and you have $30,000 sitting in your offset, the bank charges you interest on $470,000 that day, not the full $500,000.

Done properly, it’s one of the most useful features in a home loan. Your everyday cash works harder without being locked away. You keep full access to the money. And because you’re paying less interest, more of each repayment chips away at the principal.

The catch is that all of this depends on the account being correctly linked, correctly categorised in the lender’s systems, and correctly included in the daily interest calculation. That’s three separate things that all need to be right, every single day, for the life of your loan. ASIC’s review found that this isn’t always happening.

What the review actually found

The failures ASIC identified fall into a few buckets, and they’re worth understanding because they change what you should be checking.

Some customers had offset accounts that were never properly linked to their loan in the lender’s system. The account existed, money went in and out of it, but the daily interest calculation on the home loan simply ignored it. Months and in some cases years of assumed interest savings were never actually happening.

Others had offsets attached to loan products where the offset feature didn’t really work as advertised, or where the fees and rate premium for having the offset outweighed any benefit the customer was ever likely to get from it. A borrower keeping $2,000 in an offset while paying a $10 monthly fee and a slightly higher rate for the privilege is going backwards, not forwards.

And in some cases, the disclosure at the point of sale was poor enough that customers didn’t understand what they were being sold or how it was meant to work.

The misconception worth naming here is the big one. Many borrowers assume that if something is wrong with their loan, the bank would flag it. ASIC’s review confirms that’s not what happened. The errors were found by the regulator’s review, not by the lenders proactively auditing their own customers. If you’re waiting for a letter from the bank telling you your offset hasn’t been working, you may be waiting a very long time.

The checks worth doing this week

The good news is this doesn’t require a forensic accountant. There are a handful of practical things you or your broker can look at, and most of them take minutes rather than hours.

Start with your most recent home loan statement. Look for the interest calculation. If your offset is working, the interest charged should reflect your loan balance minus your average offset balance for the period, not the full loan balance. If you’re seeing interest calculated on the full loan amount despite having money consistently sitting in the offset, that’s the first red flag.

Next, check that the offset account is actually named and linked to the home loan on your statement or in your online banking. Some lenders show this clearly. Others bury it. If you cannot see a direct link between the two accounts anywhere in your paperwork, ask.

Then look at the product itself. Is the offset a full 100% offset, or is it a partial offset that only credits a portion of the balance against your interest? Partial offsets exist and they’re not always explained well at the point of sale. If you thought you had a full offset and you actually have a partial one, the maths you’ve been doing in your head is wrong.

Finally, weigh up whether the offset is earning its keep. If you’re paying an annual package fee or a higher interest rate to have the offset feature, and your average offset balance is small, you may be paying more for the feature than you’re saving through it. This is one of the most common issues our brokers find when they review a loan that was set up years ago and never revisited.

Where a broker fits in

This is the kind of review that doesn’t happen unless someone initiates it. The lender isn’t going to. Your accountant isn’t looking at your loan structure. And most borrowers don’t want to spend a Saturday morning reading loan statements.

We’re seeing more clients come in this week asking exactly this question, and it’s a sensible one to ask. Your YBR broker can pull your loan details, check how the offset is set up, run the numbers on whether it’s actually saving you money net of any fees or rate premium, and if it’s not, look at what else is available across the lender panel. Sometimes the answer is a quick fix with the existing lender. Sometimes it’s a conversation about whether the whole loan structure still suits where you are now, which is often different from where you were when you took the loan out.

This is one of those moments where a short conversation can stop a small problem quietly costing you money for another two years. If you’ve got an offset and you’ve never had anyone check it works the way you think it does, that’s a conversation worth having this month.

*The information in this article is general in nature and does not take into account your personal circumstances, financial situation or objectives. You should consider whether the information is appropriate for your needs and, where necessary, seek professional advice before making any financial decisions.