Offset accounts, explained
An offset is a bank account linked to your loan. Every dollar in it is a dollar you are not charged interest on.
How it works
With $550,000 owing and $30,000 in a full offset account, you are charged interest on $520,000. Your repayment stays the same, so more of it comes off the principal. At a 6% rate that $30,000 saves about $1,800 in interest a year.
Offset or redraw
Both reduce interest. The difference is whose money it is.
- Offset. A separate transaction account. The money is yours, with a card and full access.
- Redraw. Extra repayments you have made into the loan. The lender can set limits, fees or conditions on taking them back.
If the property may become an investment one day, the difference can matter for tax. Ask your accountant before choosing.
What it costs
Offsets usually come with a package fee or a slightly higher rate. Whether that is worth it depends on how much you keep in the account. With a few thousand in savings, a basic loan with free redraw can come out ahead.
The common mistake
People refinance to get an offset, then leave their pay and savings at another bank. Nothing is offset, and they pay the fee for nothing. If you take an offset, move your everyday banking into it.
Questions people ask
Can I have an offset on a fixed loan?
Some lenders offer it, often as a partial offset. A common setup is a split: part fixed, part variable with the offset attached.
Can I have more than one offset account?
Several lenders allow multiple offsets on one loan, which is handy for separating bills, tax and savings.
General information, last updated November 2026. Scheme figures, lender policies and duty rates change, so confirm them before you rely on them.
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