Australian mortgage holders are being urged to check whether their offset accounts are correctly linked after banks paid more than $55 million in compensation for failures that left customers paying excessive interest.
ASIC reviewed 204,000 home loans across eight banks representing more than 70 per cent of Australia’s $2.5 trillion mortgage market. Weaknesses were found at every lender in how offsets were established, monitored or managed.
The review included AMP Bank, ANZ, Commonwealth Bank, Credit Union Australia—now Great Southern Bank—HSBC, ING, Macquarie and Westpac.
What ASIC found
Reports covering September 1, 2023 to August 31, 2025 showed banks paid more than $55 million for offset-related errors. Some individual customers received over $17,000, while further remediation means the combined figure could increase.
In one case, a mortgage change accidentally disconnected an offset, costing the customer more than $3,500 in additional interest in just over a month.
The reported findings from ASIC’s mortgage review show banks had not detected 77 per cent of reported failures before the regulator requested information, although one institution accounted for most of those cases.
Why an offset failure is difficult to notice
An offset account reduces the mortgage balance used to calculate interest. A borrower with a $750,000 loan and $50,000 in a 100 per cent offset should generally pay interest on $700,000.
If the connection fails, interest may be charged on the full loan. Repayments can remain unchanged, concealing the error while less money reduces the principal and the mortgage takes longer to repay.
Around 55 per cent of Australian housing-loan facilities—approximately 1.8 million—have an offset, with about $349 billion held across these accounts. The cost of an unnoticed error becomes greater when Australian fixed mortgage rates exceed 6 per cent.
How the banking errors occurred
Manual staff mistakes caused 86 per cent of reported failures. Seven of the eight banks relied partly on manual processing, particularly when customers refinanced, split a mortgage or changed products.
One lender had not reviewed a report designed to detect possible linking problems for almost five years. Another knew its process could delay an offset connection by up to 21 days but did not fully correct it for about two years.
Some banks could not readily confirm whether customers had originally requested an offset. At one institution, reconstructing that information would have required more than 20 employees working for four weeks.
How to check your offset account
Open your banking app or mortgage portal and look for “linked accounts,” “mortgage offset” or “manage my loan.” Confirm that the displayed account number matches the account containing your savings.
Repeat this check after refinancing, fixing or splitting part of the loan, or switching mortgage products. These changes can disconnect an existing account or require a new linking request.
For a rough daily-interest estimate, subtract the offset balance from the mortgage balance, multiply the result by the annual rate and divide by 365. Transactions and rate changes affect the exact charge, so treat this only as a guide.
Borrowers should also compare their likely interest saving with any higher rate or package fee. A properly connected offset may still offer limited value when its additional cost exceeds the saving.
What to request from your bank
If the figures appear wrong, submit a formal complaint and request written confirmation of the connection. Ask the bank to recalculate interest from the date the offset should have started and provide a breakdown covering excess interest, fees and any effect on the remaining loan balance.
Banks generally have 21 days to respond to complaints involving financial difficulty and 30 days for most other matters. An unresolved dispute can be escalated to the Australian Financial Complaints Authority for free independent assistance.
Compensation is not an automatic payment for every offset customer. Eligibility depends on whether an account error caused a measurable loss. Previous cases such as the Commonwealth Bank’s $68 million customer fee refund demonstrate why any repayment calculation should be checked carefully.
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What happens next?
ASIC will monitor the banks’ corrective work, provide individual feedback and consider further regulatory action where appropriate. Additional customers may receive compensation as account reviews continue.
The Australian Banking Association says offsets worked correctly in more than 99 per cent of reviewed cases. However, incomplete records and weak detection systems mean customers should verify the connection after every loan change rather than assuming an unchanged repayment proves it is working.
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