Aussies turn to offset accounts as home loan pressures rise

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Caught between high interest rates, a booming property market, and the cost of living crisis, the majority of homeowners in Australia are feeling the heat from their home loans. 

In Mozo’s survey of 2,129 Australians, 3 in 4 borrowers (75%) report some level of concern about their home loan repayments, while 15% say they are ‘extremely concerned’.

A table of survey responses to the question 'Are your home loan repayments a concern to you right now?'

From May 2022 to January 2025, the average variable rate in the Mozo database doubled. This means a borrower with a $600,000 mortgage now pays an extra $1,286 per month, compared to when home loan interest rates were lower. 

A table showing the difference in home loan interest rates from May 2022 to January 2025

According to the survey, over half of Australians (54%) have turned to offset accounts as a way to keep their mortgage costs down, the relative majority of which say they’ve banked between $0 and $10,000 (16%).

How do offset accounts work?

An offset account reduces a borrower's loan balance when interest is calculated, often leading to lower mortgage repayments. View

Over two-thirds of borrowers (37%) say they have between $10,000 and $200,000+ in their accounts, while 18% of survey respondents claim they don’t have an offset account because they don’t have the extra savings to put into one. 

"... an offset account can function just like a regular transaction account."

According to Mozo finance expert, Rachel Wastell, this represents a misunderstanding of how this home loan feature works.

“The reality is, even your regular income or everyday spending money can sit in an offset account and help reduce the interest on your home loan,” says Wastell. 

“Around 1 in 6 people say they don’t use an offset account because they don’t have extra savings. But an offset account can function just like a regular transaction account – your salary goes in, and you use it for your daily expenses."

The key, according to Wastell, is that virtually any amount of money kept in your offset can help you save on interest and pay off your loan faster.

This is because of how interest is calculated on a mortgage. 

At most financial institutions, interest is calculated daily. This means any money sitting in your offset account at the end of each day will reduce the loan balance the bank uses to work out how much interest to charge you. 

Offset account example

As an example, let’s say, averaged over 30 years, you have $5,000 in your offset account. If your interest rate was 6% p.a. and your loan amount was $500,000, the money in your offset could help you shave 8 months off your loan term and save you $24,453 in interest payments. 

If you’d like to know more about this feature, read our offset account guide and investigate whether it’s of any use for you. To check out the latest rates from lenders who offer this feature, compare offset home loans on Mozo.


* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

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