Hidden mortgage offset failures are costing Australians millions in lost interest savings, ASIC announced this week.
Millions of Australians rely on mortgage offset accounts to reduce the cost of their home loan, but an ASIC review has found customers might have been unknowingly paying more interest than they should because some banks failed to properly manage offset accounts.
Reports to ASIC between 1 September 2023 and 31 August 2025 show banks paid over $55 million in customer compensation for offset account failures. Further compensation is expected as banks continue examining the extent of the problem.
ASIC reviewed the offset practices of eight banks, representing more than 70 per cent of Australia’s $2.5 trillion home loan market. While practices varied significantly across the banks, weaknesses were found in how all banks set up, monitored and managed offset accounts, resulting in some customers missing out on promised savings.
The findings are outlined in Report 837 ‘Offsets, out of mind: Banks fall short on mortgage offset account promises (REP 837)’.
Almost 3.3 million Australian households have a mortgage, and Australians held about $349.1 billion in offset accounts as of March 2026, up 28 per cent over the last two years.
ASIC Chair Sarah Court said offset accounts are marketed to customers as a simple way to save on mortgage interest over the life of a home loan, but some banks failed to deliver on that promise.
‘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’, Court noted.
‘Customers are doubly hit – not only losing promised interest savings but also the opportunity to use that money elsewhere.
‘Some banks are not getting the basics right. Customers should not have to discover their offset account has not been working as promised.
‘In some cases, offset failures went undetected until ASIC started asking questions. That should concern every bank offering offset accounts’, she added.
ASIC’s review found inconsistencies in the offset account practices of some banks, highlighting four key concerns:
- Banks struggled to readily identify customer offset account requests.
- Banks’ detection of offset account failures was inconsistent.
- Banks failed to compensate customers and were slow to fix issues.
- Customers lacked visibility of information on offset accounts.
After reviewing data for 204,000 unique home loans settled between 1 March 2025 and 31 August 2025, ASIC found that some banks could not readily identify whether their customers had requested an offset account, while others had to manually recreate information flows. This makes it difficult to estimate the full impact to customers of the issues identified, and suggests the problem may be more prevalent than initially identified.
‘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’, Court said.
‘While the banks we reviewed have implemented or committed to making improvements, ASIC’s findings are relevant to all banks offering offset accounts.
‘Offset accounts are important to customers and often come at a cost. Banks need stronger controls to ensure offset accounts are set up and managed correctly, and that customers receive the savings they have been promised.
‘We expect all banks to identify and address offset account failures and ensure affected customers are appropriately compensated’, Court warned, adding that ASIC will continue to monitor how banks address the issues identified in this review and take further regulatory action where appropriate.