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Home Home Loans Which fixed-rate home loans offer an offset account?
Offset accounts are typically more popular with variable-rate home loans, but there are a handful attached to fixed-rate loans, too.
By Harrison Astbury on 08 Aug 2022
Fact Checked
There are a handful of banks and lenders offering fixed-rate home loans with an offset account. Fixed-rate home loans provide interest rate surety, while offset accounts allow you to reduce the interest payable on the mortgage. Some lenders may cap how much you can have in the offset, have partial offsets (e.g. only 50% or 80% of the account balance offsetting the principal, rather than 100%), limit offsets to packaged home loans, or have other restrictions. So, it pays to do your research before you dive-in.
The table below displays a selection of fixed-rate home loans that offer offset accounts.
Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of October 7, 2022. View disclaimer.
Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of October 7, 2022. View disclaimer.
Cash you have in an offset account reduces (or ‘offsets’) the balance of your loan that's charged interest. This doesn’t lower your repayments - but it does mean that more of each repayment will go toward paying down the principal, and less toward interest, so you end up paying off the loan sooner.
You also get the flexibility to use the account as you would a normal bank account - able to transact and contribute savings as you please.
Fixed-rate loans are typically feature-light and cap extra repayments at $10,000 per year. Having an offset account theoretically means you can pile a lot of extra money in there for use when you need it, while lowering how much you pay in interest.
Many homeowners love the flexibility a variable rate provides, however a variable rate means it can change whenever. Fixed rates are typically less competitive but provide stability for a certain period. Having the added flexibility of an offset account means you can lower interest payable while still having access to that chunk of cash.
To get this feature, homeowners typically need to apply for a packaged home loan. Packaged home loans usually come with a hefty annual fee and may come with other products such as a credit card or insurance. Many lenders also charge a fee to have an offset, or add a slight premium to the interest rate - usually around 10 basis points or 0.10%.
Ask yourself if you need these features, and how you are paying for them in the long run. Packaged loans also provide an extra layer of complexity if you decide to refinance, as you might need to unwind all the other products you’ve used in the package. Additionally, if you refinance within the fixed period you could be subject to hefty break costs.
Not all lenders offer 100% offset accounts i.e. where $20,000 in the account means the debt that’s charged interest is $20,000 less. Some might only offer an 80% offset, where there’s $20,000 in the account but the balance accruing interest is only reduced by $16,000. You’ll have to do your homework here.
Fixed-rate loans with an offset account are relatively rare in the market, which means there’s fewer to choose from and not as much competition for your mortgage dollars.
Photo by Alvan Nee on Unsplash
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.
Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison strives to deliver and edit news and guides that are engaging, thought-provoking, and simple to read.
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The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. Read about how Savings Media Group manages potential conflicts of interest, along with how we get paid.
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