Offset Account 2025: Maximise Mortgage Savings in Australia

For many Australians, home ownership remains a top financial goal, but the reality of a decades-long mortgage can be daunting. As interest rates and property prices fluctuate, smart borrowers are searching for ways to minimise interest and gain an edge. Enter the offset account—a flexible and increasingly popular banking tool that, when used wisely, can save tens of thousands in interest and shave years off your home loan. In 2025, offset accounts are more relevant than ever, with new lender features and regulatory tweaks making them both appealing and accessible.

How Offset Accounts Work: The Basics (and Beyond)

An offset account is a transaction account linked to your home loan. The balance in this account is ‘offset’ daily against your mortgage principal, reducing the interest charged. For example, if you owe $500,000 and have $50,000 in your offset account, you’ll only be charged interest on $450,000. This means every spare dollar works harder for you, lowering your interest bill while keeping your funds accessible.

• Full offset vs partial offset: Most major banks now offer 100% offset accounts, but some smaller lenders still provide partial offset products, which only offset a portion of your balance.

• Accessibility: Offset accounts function just like regular everyday accounts—you can deposit your salary, pay bills, and use a debit card.

• Tax benefits: Unlike savings accounts, interest saved via offset is not considered taxable income—making this a tax-efficient way to build wealth.

In 2025, more lenders have expanded digital access to offset accounts, and some now allow multiple offset accounts to be linked to a single mortgage—ideal for families who want to separate funds for different goals while maximising interest savings.

Offset Account Trends and Policy Updates in 2025

This year, several trends and policy shifts have shaped how Australians use offset accounts:

• APRA focus on responsible lending: The Australian Prudential Regulation Authority has continued its scrutiny of mortgage lending standards, but offset accounts remain unaffected, allowing borrowers to flexibly manage their cash flow.

• Fee structures evolving: Some lenders have begun reducing or waiving offset account fees to attract new borrowers, but be wary—these perks often come with higher variable rates.

• Digital innovation: Banks like Macquarie, ING, and CBA have enhanced their mobile apps to offer real-time offset tracking, goal-setting, and even round-up features that automatically boost your offset balance with spare change.

• Interest rate volatility: With RBA rate changes likely in 2025, the interest-saving potential of offset accounts is even more valuable, especially for variable-rate borrowers.

Importantly, offset accounts remain one of the few ways to reduce interest without being locked into a fixed repayment schedule or incurring break fees.

Real-World Examples: Maximising Your Offset Strategy

Let’s look at two scenarios to see offset accounts in action:

• The family saver: The Smiths have a $700,000 mortgage at 6.1% and keep $30,000 in their offset account—salary, savings, and emergency fund combined. Over 10 years, this could save them over $18,000 in interest and cut six months off their loan term, assuming they maintain that balance.

• The savvy investor: Priya uses her offset account to park rental income from her investment property. By keeping $25,000 in her offset, she saves on non-deductible interest without reducing the loan principal, preserving her future tax deductions.

Pro tip: Set up your salary to be paid directly into your offset, and use a credit card for everyday purchases (paid off in full each month) to keep as much money as possible offsetting your loan for longer.

Choosing the Right Offset Account in 2025

Offset accounts are not all created equal. Here’s what to consider when comparing options this year:

• 100% offset: Ensure the account offers full offset against your mortgage balance.

• Fees: Check for monthly account fees, package fees, or higher loan rates.

• Accessibility: Look for easy online transfers, BPAY, and mobile app features.

• Multiple offsets: If you want to separate funds (e.g., for holidays, tax, or bills), see if the lender allows multiple offset accounts under one loan.

• Linked loan types: Most offset accounts are linked to variable-rate loans, but a handful of lenders are now offering offset features on fixed-rate products—albeit with more restrictions.

Always weigh the potential interest savings against any extra costs or restrictions. And remember, the more consistently you keep a higher balance in your offset, the greater your savings.