July 2026

Australia’s major banks have spent years promoting mortgage offset accounts as one of the smartest ways for borrowers to reduce the cost of their home loans. They advertise them as a simple, effective tool that can save homeowners tens of thousands of dollars over the life of a mortgage. Many borrowers even pay annual package fees and accept higher loan costs to access these accounts.

Now we discover that, in too many cases, the banks haven’t even managed to make them work properly.

The latest ASIC investigation is yet another reminder that Australia’s major banks continue to find new ways to let down the very customers who keep them profitable. Whether through incompetence, poor systems or wilful neglect, the result is exactly the same: ordinary Australians paying more interest than they should have while the banks quietly collect the extra income.

Given the findings of the 2017-2019 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, it’s tempting to believe that some banks are knowingly cheating their customers.

ASIC’s findings are disturbing.

Between September 2023 and August 2025, banks had to paid $55 million in compensation after offset account failures caused customers to be overcharged interest. And that figure is almost certainly not the end of the story. ASIC expects compensation payments to continue rising as more mistakes by the banks are uncovered.

Think about what this really means.

These weren’t sophisticated investment products or complex financial derivatives. Offset accounts are one of the most basic features of modern home lending. Their purpose is straightforward. If you have a $700,000 mortgage and $100,000 sitting in your offset account, you should be paying interest on only $600,000.

It isn’t rocket science.

Yet ASIC found weaknesses across every one of the eight major lenders it examined, covering more than 70% of Australia’s mortgage market. Some banks couldn’t even tell whether customers had requested an offset account. Others relied on manual processes that inevitably led to human error. Some failed to detect problems for years. Others knew about system flaws but took years to fix them.

This isn’t simply an administrative oversight.

Every day an offset account fails to operate correctly is another day the customer pays too much interest. The bank, meanwhile, earns interest it was never entitled to receive from its customers.

The most disturbing aspect is that borrowers often have no way of knowing anything is wrong.

As ASIC Chair Sarah Court pointed out, loan repayments generally remain unchanged. Customers simply take longer to repay their mortgage while paying thousands of dollars in additional interest without realising it. The financial damage is hidden from view.

One Brisbane family did not discover their offset account wasn’t working until they refinanced with another lender. They had been diligently depositing their savings into what they believed was an offset account for almost two years. It wasn’t reducing their interest at all. Eventually they received more than $5,000 in compensation, but only after the error came to light during the refinancing process. Another customer ended up receiving more than $10,000 in compensation. How many others have never discovered they’re being overcharged?

The uncomfortable truth is that these failures appear to be far more widespread than anyone imagined.

ASIC found banks had failed to identify 77% of reported offset failures before the regulator started asking questions. One bank hadn’t even reviewed an internal report designed to identify offset failures for almost five years. Another estimated it would require 20 staff working for four weeks simply to determine which customers had requested offset accounts because the information wasn’t properly digitised.

If a small business ran itself this way, it would soon go broke.

But Australia’s banking sector continues posting multi-billion-dollar annual profits while customers are expected to accept excuses about legacy systems and manual processing.

Even more frustrating is that this isn’t a new problem.

ASIC has dealt with offset account failures before. Bankwest refunded customers in 2017. NAB refunded customers the same year. ANZ was later penalised over failures involving offset-related benefits. The industry has known about these problems for years, yet here we are again discussing another round of compensation and another set of promises that systems will be improved.

The banking industry’s response is predictable. It says more than 99% of offset accounts work correctly and affected customers are being compensated. Even if that were true, which is doubtful, it misses the point entirely. When Australians are paying hundreds of dollars a year in package fees and trusting banks with their life savings, the expectation isn’t that systems work most of the time. The expectation is that they work properly every time.

Offset accounts have become increasingly popular because higher interest rates have encouraged borrowers to use every available dollar to reduce mortgage costs. More than half of Australian housing loans now have an offset account attached, with almost $350 billion sitting in those accounts. That makes getting the basics right more important than ever.

For homeowners, the lesson is obvious. Don’t assume your offset account is doing what the bank promised. Check that it is properly linked to your mortgage, particularly after refinancing, changing loan products or fixing part of your loan.

And for the banks, the message from ASIC couldn’t be clearer.

Stop charging customers for products you can’t reliably deliver.

Australia’s major banks have once again demonstrated that when basic systems fail, it’s their customers who pay the price.