TLDR
Australian banks have paid more than $55 million in compensation to mortgage holders whose offset accounts were never properly set up, according to the Australian Securities and Investments Commission. In 55 per cent of cases reviewed, accounts were opened but never linked to the home loan, silently costing borrowers interest savings they were entitled to. ASIC chair Sarah Court said further payments are expected as banks continue remediation across loans settled as recently as August 2025. Borrowers can check whether their offset balance is reducing their loan principal by examining their monthly statement.
KEY TAKEAWAYS
$55 million paid, more to come
Australian banks paid more than $55 million in compensation between 1 September 2023 and 31 August 2025 for offset account failures that left mortgage holders silently overpaying interest.verifiedVerified Source: asic.gov.au[1] The Australian Securities and Investments Commission published the findings on 29 July 2026, and the bill is not final.
ASIC chair Sarah Court said the remediation is ongoing. "The banks continued to pay customer compensation for offset account failures reported after 1 September 2025. We expect this amount to increase as banks continue remediation."[1]
What the review covered
ASIC reviewed the offset account practices of eight banks that together hold more than 70 per cent of Australia's $2.5 trillion home loan market.[1] The regulator examined data for 204,000 home loans settled between 1 March 2025 and 31 August 2025 to assess how reliably banks were setting up the accounts borrowers had requested.[1]
Australians held $349.1 billion in offset accounts as at March 2026, a 28 per cent rise over the previous two years, across almost 3.3 million households with a mortgage.verifiedVerified Source: asic.gov.au[1] The scale of that market makes even a small failure rate costly for borrowers.
The four ways banks got it wrong
ASIC identified four distinct failure types. The most common, accounting for 55 per cent of reported cases, was an account opened but never linked to the home loan.[1] In that scenario, the borrower sees a normal-looking account balance in their banking app while the offset mechanism never activates, and their loan accrues full interest as though no offset existed.
A further 22 per cent of failures involved accounts that were never opened at all; 14 per cent were linked later than the bank had promised; and the remaining 9 per cent fell into other categories.[1] Court said precisely why the most common fault is so damaging. "When offset accounts don't operate correctly, the harm can be hidden. Loan repayments stay the same, while customers unknowingly pay more interest and take longer to repay their loan."[1]
Why banks were slow to catch and fix the errors
ASIC found banks struggled to identify which customers had actually requested an offset account in the first place, making it hard to know which loans to check.[1] When failures were detected, the process was inconsistent, remediation was slow, and customers were given poor visibility of their offset account information throughout.[1]
ASIC has directed all banks to identify offset account failures, fix them and ensure affected customers are appropriately compensated.[1] Court said the expectation is clear. "We expect all banks to identify and address offset account failures and ensure affected customers are appropriately compensated."[1]
How to check your own offset account
An offset account is a transaction or savings account linked to a home loan where the balance is deducted from the loan principal before interest is calculated. A borrower with a $400,000 loan and $50,000 in their offset account should be paying interest only on $350,000.
Fifty-five per cent of the offset account failures ASIC documented involved an account that appeared open and normal but was never linked to the loan, meaning borrowers had no visible signal anything was wrong.verifiedVerified Source: asic.gov.au[1] Three checks can surface a problem: confirm your loan statement shows an offset balance reducing the interest-bearing principal; verify in your banking app that the offset account is explicitly named as linked to your home loan account number; and contact your bank directly if the interest charged appears inconsistent with the offset balance you hold. ASIC's 29 July 2026 release directs affected customers to contact their bank to initiate a review.
SOURCES & CITATIONS
- ASIC Media Release 26-173MR: Hidden mortgage offset failures costing Australians millions in lost interest savings
- ASIC Report REP 837: Offsets, out of mind - Banks fall short on mortgage offset account promises (PDF)
- Banks roasted for mortgage offset account failures, Savings.com.au
- ASIC Chair Sarah Court speaks at Mortgage Offset Press Conference, ASIC
FREQUENTLY ASKED QUESTIONS
What is an offset account and how should it work?
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Vikram Singh writes about banking. He follows where money actually moves, from the strategy set in head office to what changes on a customer's phone.
Important information
This article is general information only. It does not take into account your objectives, financial situation or needs, and it is not financial, credit or legal advice. Consider whether it is appropriate for you, and seek advice from a licensed professional before acting on it.
Bushletter does not hold an Australian Credit Licence. Bushletter does not arrange, recommend or provide credit, and does not assess applications. If you think you have been affected, contact your lender or the Australian Financial Complaints Authority.
