Is your mortgage offset actually working after refinancing?

Disclosure: The author may hold Australian property or listed bank investments. This article has no lender, broker, affiliate or referral sponsorship.

Refinancing is usually treated as the moment when an old loan ends and a cheaper one begins. For an offset account, however, settlement is also a handover between account numbers, loan splits and product rules. The transaction account may stay visible while its connection to the loan changes.

That distinction matters because the repayment does not necessarily jump when the offset stops working. More interest can simply be added to the loan, leaving a slightly higher balance or a longer repayment path. A borrower who checks only the repayment amount can miss the problem.

The useful test has three parts. Did the offset account exist? Was it linked to the intended eligible loan or split? Did the interest charged reflect the eligible balance? Each question needs different evidence.

An offset account and an offset benefit are not the same thing

Moneysmart explains an offset as a transaction account linked to a home loan. The lender generally calculates interest on the loan balance less the eligible amount in that account. If a $600,000 variable loan has a fully eligible $40,000 offset balance, the interest-bearing balance should usually behave more like $560,000 while that balance remains there.

The word “linked” carries most of the weight. An account can accept salary and card transactions without being linked to the new loan. It can be linked to the wrong split, or to a split that does not receive a full offset. Some fixed-rate products have no offset or only a partial one. Product terms, not the account label, decide what is eligible.

This is also why redraw is not a substitute for checking the offset. Redraw is access to extra repayments already made against the loan. Offset money remains in a separate transaction account. Both may reduce interest, but access, account ownership and lender terms differ.

Start with the loan contract, product schedule and settlement documents. Record every loan account number, each split, whether it is fixed or variable, and the offset account number that was meant to attach to it. Then ask the lender to confirm the link in writing. A screen showing “offset” is useful evidence, but it is not yet the interest test.

Loan changes are the moment to check the link again

A new lender is an obvious trigger. Less obvious triggers include an internal refinance, converting a product, creating or closing a split, rolling off a fixed rate, changing borrowers, restructuring a package or asking the bank to move an offset from one split to another.

ASIC’s 2026 offset-account review covered eight banks and examined data for 204,000 unique home loans settled from March to August 2025. Separately, banks reported paying more than $55 million in compensation for offset failures reported to ASIC from September 2023 to August 2025. The compensation figure is not a loss estimate for the 204,000-loan sample. Failures included accounts not opened, accounts opened but not linked, late linking and other problems.

The regulator’s detailed report identified manual processing as a recurring weakness, particularly around changes made during the life of a loan. That does not mean every refinance breaks an offset. It means the old configuration is not evidence that the new one works.

A sensible habit is to capture the configuration before and after any change. Save the request, approval, settlement statement and first loan statement under the new arrangement. Add a dated screenshot of the offset screen and the lender’s written confirmation. These few records are far easier to collect at settlement than a year later.

Check existence, linkage and interest in that order

The first check is simple: can the account receive and send money, and does its number match the promised offset account? This catches an account that was never opened, but it cannot catch a missing link.

The second check is relational. Which exact loan or split does the lender say the account offsets? Match the written answer against the account numbers in your contract and statement. If there are several splits, ask whether the offset is full or partial and whether more than one account can be linked. Do not rely on labels such as “home loan” or “package” when account numbers are available.

The third check is financial. Does the interest charged move as though the eligible offset balance were deducted each day? Some statements show an offset benefit; others do not. Either way, compare at least one period with a stable balance and known rate. A configuration screen can pass the second test while the third still deserves investigation.

This sequence avoids two common dead ends. Calling an account “missing” when it merely has a display problem wastes time. Accepting “we can see the link” as proof of past interest savings may leave the financial question unanswered.

Use a daily estimate as a smoke alarm, not a verdict

Home-loan interest is commonly calculated daily. A useful first-pass estimate for one day is:

eligible offset balance × annual loan rate ÷ 365

Suppose the eligible offset balance stayed near $40,000 for 30 days while the annual loan rate was 6 per cent. The rough saving is $40,000 × 0.06 × 30 ÷ 365, or about $197. If the balance was $10,000 for half the month and $40,000 for the other half, using $40,000 for the whole month would overstate the expected benefit. Daily balances are better; an average balance is only a screening estimate.

Now compare that estimate with the lender’s statement or written reconstruction. If the interest charged appears almost identical to what a full $600,000 balance would have produced, there may be a material discrepancy worth raising. A small difference is not automatically a failure.

The counter-signals to a missing-offset conclusion are an eligible partial-offset rule, a different daily balance or rate, and a lender reconstruction that reconciles the statement. Those conditions would change the view: if the bank’s daily figures match the contract and the observed transactions, the apparent discrepancy is resolved.

The calculation has limits. Rates can change during the period. Deposits and withdrawals may fall on different processing days. The offset may be partial, capped or ineligible for a fixed split. Repayments change the principal. Lenders may apply contractual rounding and timing rules. Fees are not interest. ASIC’s review did not test the accuracy of banks’ underlying interest-calculation systems, so a spreadsheet cannot be presented as a replica of the lender’s engine.

Treat the estimate like a smoke alarm: it tells you where to ask for the exact daily calculation. It does not establish misconduct or a compensation amount by itself.

Build a timeline before asking for compensation

A strong complaint is a reconstruction request, not a long description of frustration. Put the documents in date order and identify the point at which the promised configuration should have begun.

Keep the loan offer and product schedule, refinance or variation request, settlement confirmation, offset-opening or linking request, loan and offset statements, rate-change notices, screenshots, chat transcripts and complaint references. If a document is missing, name it and ask the lender to retrieve its own record. The bank, not the borrower, holds the complete system history.

Your written complaint can ask the lender to confirm:

• the date it received and completed the offset request;

• the offset account and eligible loan or split involved;

• every period in which the link was absent, late or attached elsewhere;

• the daily loan balances, eligible offset balances and rates used in its reconstruction;

• the extra interest, fees and resulting loan-balance or term effect;

• the correction date and current link; and

• any refund, interest adjustment or other remediation, with the calculation shown.

Ask for a complaint reference and call it a complaint rather than a service query. That creates a clear record for internal dispute resolution. Keep paying the loan as required while the issue is investigated unless the lender or a qualified adviser tells you otherwise.

Relinking today does not answer what happened yesterday

When a bank repairs the link, check the effective date. A current screenshot may show that the account works now but say nothing about the months before correction.

ASIC’s report describes the hidden harm as more than a missing line item. Extra interest can leave the principal higher and may extend the time needed to repay the loan. A complete reconstruction therefore asks what the loan position would have been if the promised offset had worked, not only how much cash interest should be refunded.

Compensation is not automatic. The bank must assess the evidence, causation and applicable obligations. The purpose of the borrower’s estimate is to make the affected period and scale testable. It should not be inflated with a rate or balance that did not apply.

If the lender does not resolve the complaint, AFCA provides free independent external dispute resolution , and mortgage offset is included among its banking complaint categories . A consumer generally complains to the lender first. ASIC’s dispute-resolution guidance explains that credit providers must have internal and external dispute-resolution arrangements.

Regulatory Guide 271 sets a maximum of 30 calendar days for an internal dispute-resolution response to a standard complaint. Other complaint categories have different timeframes. Where the guide’s delay exception applies, the firm must explain the delay and provide AFCA escalation information before the relevant deadline. A response deadline is not a guarantee of compensation or a completed remedy.

A working offset can still be poor value

Passing the audit answers whether the feature operates as promised. It does not answer whether the loan is competitive.

The annual interest saving from a fairly stable balance can be approximated as the eligible balance multiplied by the loan rate. A $10,000 average balance at 6 per cent points to roughly $600 a year before timing effects. If the offset package costs $395 a year and the loan rate is higher than a comparable no-offset product, the remaining benefit may be thin. A larger balance or a stronger need for transaction-account liquidity can change the conclusion.

Compare the whole loan, as Moneysmart’s home-loan guide recommends: rate, fees, feature eligibility and how you actually use the account. The cheapest-looking rate is not always the best fit, but an attractive feature name should not shield an expensive package from comparison either.

For a wider household stress test, the article on equity, serviceability and accessible cash separates a deposit from the cash buffer needed after settlement. Investors reading the lender side can use mortgage competition and bank earnings to see why retention pricing and operational execution matter to banks as well as borrowers.

The five-minute check and the deeper check

The five-minute check is to match the offset and loan account numbers, confirm the eligible split and save the evidence. Do it after settlement and after every product or split change.

The deeper check uses statements and daily balances to estimate the expected saving, then asks the lender for its exact reconstruction. If a discrepancy remains, turn the timeline into a formal complaint and keep the response for any AFCA escalation.

The central lesson is modest but useful: an offset is not working merely because the account exists. It is working when the right eligible balance reduces interest on the right loan. Checking those links early protects both the monthly cash flow and the long repayment path.

This article provides general information only. It is not personal financial, credit or legal advice and does not determine any compensation entitlement. Loan terms and individual circumstances vary; check your contract and obtain qualified advice where needed.