Imagine losing tens of thousands of dollars on your mortgage – without even realising it. That’s the reality for more than half of Australian homeowners, according to new research from Money.com.au.
A staggering 57 per cent of mortgage holders have never checked if their offset account is correctly linked to their home loan, potentially costing them thousands in unnecessary interest payments.
An offset account is one of the most powerful tools for slashing your mortgage interest.
By linking it to your home loan, the money in the account reduces the loan balance on which interest is calculated.
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But if the account isn’t linked properly, you’re essentially throwing money down the drain –paying more interest than you should.
Shockingly, one in ten borrowers wrongly assumes their lender will automatically link their offset account to their mortgage.
Only 25 per cent of homeowners have confirmed their account is correctly linked, while 9 per cent discovered it wasn’t and had to fix the issue.
The $340,000 offset nightmare
Debbie Hays, Mortgage Expert at Money.com.au, shared a jaw-dropping example of how costly this oversight can be.
She recounted the story of a homeowner who deposited $340,000 from an inheritance into their offset account, thinking they were saving on interest.
A year later, they discovered the account wasn’t linked to their variable home loan at all.
The interest savings they thought they were getting simply didn’t exist.
New research from Money.com.au reveals 57 per cent of mortgage holders have never checked whether their mortgage offset account is correctly linked to their home loan – a simple error that could be costing them thousands in extra interest.
Fortunately, they caught the issue early – but imagine if it had gone unnoticed for a decade. Hays warns that offset mislinking can happen for various reasons, from administrative errors to changes during refinancing.
“Offset mislinking can happen for a range of reasons ranging from administrative errors to
account changes during refinancing, but it’s ultimately the borrower who pays the price,” she says.
“Lenders need to ensure their systems are set up properly, but borrowers also have a
responsibility to double-check. A quick look at your loan statement or internet banking could
save you a lot of money.”
How much could this mistake cost you?
The financial impact of an unlinked offset account is staggering.
For example, a borrower with a $600,000 mortgage at 5.50 per cent p.a. and $30,000 in their offset account could pay an extra $111,620 in interest over 30 years if the account isn’t linked. Worse still, they’d remain in debt for nearly three additional years compared to a correctly linked offset account.
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The survey also found that one in ten borrowers assume their offset account is automatically linked by their lender, while only 25 per cent have confirmed it’s correctly attached.
The research also revealed that Baby Boomers are the least likely to check their offset accounts, with 69 per cent admitting they’ve never confirmed whether their account is linked. This compares to 58 per cent of Gen Z, 50 per cent of Gen X, and 47 per cent of Millennials. “Older Australians have been paying their mortgages for decades, so if their offset hasn’t
been linked correctly that could mean years of lost interest savings. That’s money they may
not be able to recover if the issue wasn’t detected early,” Hays says.
How to protect yourself and your property finances
To avoid falling into this costly trap, homeowners should take immediate steps to confirm their offset account is linked to their home loan.
This can be done by logging into online banking or checking a home loan statement for an offset adjustment or similar line item.
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The Australian Financial Complaints Authority is currently investigates potential offset-account mislinking issues across eight major lenders’ mortgage books.
If there’s any uncertainty, contacting the lender directly is essential.
If the account isn’t linked, borrowers should request that the connection be backdated to the loan settlement date.
In cases where the lender is at fault, homeowners may be entitled to a refund of the extra interest charged.
If the issue isn’t resolved, the matter can be escalated through the lender’s dispute resolution process or taken to the Australian Financial Complaints Authority.
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