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An offset account is a transaction or savings account linked to your home loan. Instead of earning interest, the balance is subtracted from your loan balance when interest is calculated, so $50,000 in offset on a $750,000 loan means you're charged interest on $700,000. You keep full access to the money.
Offset is only worth paying for if your balance saves more than the fees or rate premium attached to it. This page explains the maths, the difference from redraw, and which of the lenders we review offer offset, what it costs and whether it works on fixed rates.
By Better Rate Mate Editorial Team · Last reviewed
Most loans calculate interest daily on the outstanding balance. With a 100% offset, the offset balance is deducted first. Your required repayment usually stays the same, but because less of it goes to interest, more goes to principal and the loan is paid off sooner.
Moneysmart's example: on a $750,000 loan with $50,000 kept in offset, you pay interest on $700,000. If your balance will always be low (it suggests under $10,000), offset may not be worth any extra cost. As a rule of thumb, divide the annual cost of the offset by your rate to find the average balance you need to break even: at 6.24%, a $299 annual fee needs an average balance of about $4,800, and $10 a month ($120 a year) about $1,900. Any rate premium on the offset loan raises that figure.
Both reduce interest. Redraw means making extra repayments into the loan itself and withdrawing them later if the loan terms allow; an offset account is a separate account with its own BSB and account number. Offset money is your savings; redraw money has been repaid to the lender, and taking it out is borrowing again.
That difference matters if your home might become an investment property. The ATO looks at how borrowed money is used: redrawing for private spending creates a private-purpose borrowing, and if you later rent the property, interest on the loan is only deductible for the part used to produce income. Money held in an offset never reduced the loan balance, so withdrawing it doesn't create a new borrowing. Get tax advice before you convert.
Most lenders offer offset on a variable loan at a price: a monthly fee, an annual package fee or a slightly higher rate. Few offer it on fixed loans.
| Lender | Offset | Cost | On fixed loans? |
|---|---|---|---|
| CommBank | 1 (Digi), up to 2 (Simple), multiple (Standard Variable) | $10 a month on Digi and Simple; Wealth Package $395 a year | No |
| Westpac | Up to 10 (Rocket Repay) | Priced with the $395 Premier Advantage Package | No |
| ANZ | ANZ One offset (Standard Variable) | $10 a month | No |
| NAB | Up to 10 (Tailored variable) | Monthly service fee listed | No |
| ING | 100% via Orange Everyday (Orange Advantage) | $299 a year | No |
| Macquarie | Up to 10 (Offset Home Loan) | $248 a year | Not stated; check with Macquarie |
| ME Bank | Up to 10 (CompleteME, variable) | $395 a year | No |
| BOQ | 100% (Clear Path) | $10 a month | No |
| Suncorp Bank | Optional 100% (variable) | Fee waived in the $375 package | No |
| Bendigo Bank | 100%, up to 6 (Flex, Complete) | See fee schedule | Yes, full offset |
| Bankwest | 100% (Simple); multiple in package | $395 package for multiple | 40% offset available |
| Athena | 100% (Power Up) | $0 fees | No |
| Unloan | None (redraw only) | n/a | n/a |
Cost is the main one: offset loans often carry a monthly or annual fee, or a higher rate than the same lender's basic loan. Offset only works on variable loans at most lenders, so you may have to give up a fixed rate or split the loan. Excess balances above the loan amount earn nothing: Macquarie, for example, notes that if your offset balance exceeds the loan balance you aren't paid interest on the excess. And money sitting in an offset is easy to spend.
An ASIC review found some banks had failed to link offset accounts properly, so customers paid more interest than they should have. Moneysmart's advice is to check your statements show the offset benefit, and to re-check the link after any refinance or product switch.
For an owner-occupied loan, a dollar in a 100% offset saves the same interest as a dollar of extra repayment, but stays accessible. Extra repayments into a loan without fees can be cheaper if you don't need an offset's flexibility, and redraw gives some access. If the property could become an investment later, offset keeps your tax options open.
It's an everyday or savings account linked to your home loan. Its balance is deducted from the loan balance when interest is calculated, so you pay less interest while keeping access to your money.
They usually cost something (a monthly or package fee, or a higher rate), they're mostly unavailable on fixed loans, balances above the loan amount earn nothing, and some banks have failed to link them properly.
An offset account doesn't pay you interest; it reduces the interest you're charged. So there's no interest income to declare, which is one reason offset can beat a savings account for a borrower.
At a few lenders. Bendigo Bank's Flex and Complete loans offer a full offset on fixed rates, and Bankwest offers a 40% offset on fixed loans. Most major banks don't offer offset during a fixed term.
Divide the offset's annual cost by your interest rate. At 6.24%, a $299 annual fee needs an average balance of about $4,800 to break even, before any difference in rate.
We don't quote lenders' interest rates: they change daily and with every RBA decision, and we don't have a live rate feed. The averages we quote are the RBA's published figures for the month shown. Always get the lender's key facts sheet, which shows the rate and comparison rate for your loan amount.
