A regulatory review into how banks manage mortgage offset accounts has uncovered widespread failures that left customers quietly paying more interest than they should have, at a time when offset balances have never been higher.
ASIC's review of eight banks — covering more than 70% of Australia's $2.5 trillion home loan market — found banks paid out over $55 million in compensation for offset failures reported between September 2023 and August 2025, with further payouts expected as remediation continues.
The corporate regulator examined 204,000 unique home loans settled between March and August 2025 and identified four recurring problems: banks struggling to identify customer offset requests, inconsistent detection of failures, slow or absent compensation, and poor visibility of account information for customers. Of the failures banks did identify, 55% involved an offset account being opened but never linked, while 22% were never opened at all.
ASIC chair Sarah Court (pictured) said the harm from these failures is easy for customers to miss.
"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 said. "In some cases, offset failures went undetected until ASIC started asking questions."
The findings land as offset accounts become more central to how Australians manage their mortgages. Just over half of all home loans now have an attached offset, with a combined $349.1 billion sitting in these accounts as of March 2026 — a record in both dollar and percentage terms.
ASIC's review found offset balances rose 28% over the past two years, while Canstar's analysis of the same underlying APRA and RBA data shows a steeper 53% increase since rate hikes began in 2022, reflecting the longer four-year window. Canstar estimates this money collectively saves borrowers an estimated $61 million a day in interest, underscoring how costly even minor linking errors can become at scale.
That scale of benefit is exactly what makes the ASIC findings concerning, according to Canstar data insights director Sally Tindall.
"ASIC's report is hugely concerning. Customers trust their bank to apply interest charges correctly on what is typically their biggest monthly expense," Tindall said.
She suggested customers "get a trusted advisor such as your mortgage broker or accountant to check for you," rather than assuming their offset account is working as promised.
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