Many are now turning to offset accounts in response to rising costs
With homeowners facing mounting pressures from rising interest rates, a survey of over 2,000 Australians has revealed that 75% of borrowers are concerned about their mortgage repayments, with 15% saying they are extremely concerned.
The findings of the survey from financial comparison site Mozo highlight the financial strain caused by the Reserve Bank of Australia’s interest rate hikes, which have sharply increased borrowing costs over the past two and a half years.
The data shows that from May 2022 to January 2025, the average variable home loan rate in its database has doubled. For a borrower with a $600,000 mortgage, this translates to an additional $1,286 in monthly repayments compared to the period of historically low interest rates.
Mozo also found that in response to rising costs, many homeowners are turning to offset accounts to manage their mortgage expenses. Over half (54%) of respondents said they use an offset account, with the largest group reporting balances of between $0 and $10,000. Meanwhile, 37% said they had between $10,000 and $200,000 or more saved in their offset accounts.
However, 18% of borrowers said they don’t use an offset account, citing a lack of extra savings as the main reason. According to Mozo finance expert Rachel Wastell (pictured above), this reflects a misunderstanding of how offset accounts work.
“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,” Wastell said.
She explained that offset accounts function like regular transaction accounts, where salaries can be deposited and daily expenses withdrawn. The difference lies in their ability to reduce the interest charged on a home loan.
Interest on mortgages is typically calculated daily, meaning that even small amounts in an offset account can lower the principal balance used to calculate interest charges. Mozo pointed out that this feature can provide homeowners with a practical tool to manage rising mortgage costs in a challenging economic environment.
“Virtually any amount of money kept in your offset account can help you save on interest and pay off your loan faster,” Wastell said.
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