{"id":5397,"date":"2024-03-14T08:53:03","date_gmt":"2024-03-13T22:53:03","guid":{"rendered":"https:\/\/financialplus.com.au\/?p=5397"},"modified":"2024-03-14T08:53:03","modified_gmt":"2024-03-13T22:53:03","slug":"why-offset-accounts-are-hitting-new-highs","status":"publish","type":"post","link":"https:\/\/financialplus.com.au\/why-offset-accounts-are-hitting-new-highs\/","title":{"rendered":"Why offset accounts are hitting new highs"},"content":{"rendered":"

\"\"Spare cash can be tight right now (cost of living crunch, anyone?). But if you\u2019ve still got some savings plus a home loan, there\u2019s a way you could make your surplus funds work harder.<\/strong><\/p>\n

Ever heard of an offset account?<\/p>\n

They\u2019re becoming an increasingly popular add-on feature to home loans, with new data showing that homeowners are stashing money in their offset accounts at a record pace.<\/p>\n

In fact, balances in\u00a0offset accounts have increased to 11% of credit limits<\/a>, the highest share since APRA started collecting data on this particular stat in March 2019.<\/p>\n

This essentially means that, on average, people with offset accounts are only paying interest on 89% of their mortgage each month.<\/p>\n

So how do home loan offset accounts work?<\/h3>\n

An offset account is a cash account linked to your home loan.<\/p>\n

The bank doesn\u2019t pay you interest on the offset account. Instead, the balance of the account is deducted from (or \u2018offset\u2019 against) the balance of your home loan when loan interest is calculated.<\/p>\n

For example, say you have $20,000 in an offset account and a home loan worth $615,000, which is about the size of the\u00a0average new mortgage Australia-wide<\/a>.<\/p>\n

Instead of monthly interest being based on the full $615,000, the lender will only charge interest on $595,000 \u2013 that\u2019s the $615,000 loan minus the $20,000 in the offset account.<\/p>\n

This means you pay less loan interest each month.<\/p>\n

And there\u2019s an added bonus: because your loan repayment amount stays the same, more of each payment goes towards paying down the loan principal, which in turn helps to reduce next month\u2019s interest cost.<\/p>\n

And so on and so forth.<\/p>\n

In this way, offset accounts are a way for borrowers to swing the mortgage pendulum more in their favour, with savings on interest plus the potential to pay off their home loan sooner.<\/p>\n

Why are offsets so popular right now?<\/h3>\n

Long story short, offsets are increasingly popular right now in no small part due to high interest rates.<\/p>\n

And because no interest is paid on the balance of the offset account, there is no tax impact.<\/p>\n

That\u2019s quite different from having a separate savings account, where a high income earner can lose a sizeable chunk of their interest earnings to tax.<\/p>\n

The icing on the cake is that the home loan interest rates that lenders charge are typically higher than the interest returns they pay on savings accounts.<\/p>\n

This means offset accounts can let borrowers make their spare cash work harder by saving more on loan interest than they could earn with a regular savings account.<\/p>\n

Last but not least, some lenders allow you to have multiple offset accounts (with debit cards attached!) linked to the one home loan, which can allow you to put all your money to work each month \u2013 as opposed to having it in different buckets across a number of low-interest transaction accounts.<\/p>\n

What to consider with offset accounts<\/h3>\n

First and foremost, the money you put into your offset account is potentially money you could be investing elsewhere.<\/p>\n

So you\u2019ll have to weigh up whether that money is better served by helping you pay off your home loan sooner, or investing towards your future in other assets.<\/p>\n

Secondly, it\u2019s important to be confident you are paying a competitive home loan interest rate.<\/p>\n

That\u2019s because offset home loans may come with loan fees and\/or higher interest rates than more traditional loans. Not always, but sometimes.<\/p>\n

Last but not least, offset accounts don\u2019t tend to work with fixed-rate home loans. But \u2026 there are ways you could split your home loan so that it\u2019s part fixed and part variable (with your offset account attached to the variable side).<\/p>\n

That\u2019s why talking to us about your home loan needs is important.<\/p>\n

We can compare across our wide panel of lenders to help line you up with a loan that matches your needs \u2013 and discuss whether an offset account might be a suitable option for you.<\/p>\n

Disclaimer:<\/strong>\u00a0The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.<\/p>\n","protected":false},"excerpt":{"rendered":"

Spare cash can be tight right now (cost of living crunch, anyone?). But if you\u2019ve still got some savings plus a home loan, there\u2019s a way you could make your surplus funds work harder. Ever heard of an offset account? They\u2019re becoming an increasingly popular add-on feature to home loans, with new data showing that […]<\/p>\n","protected":false},"author":23,"featured_media":5398,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[110],"tags":[],"class_list":{"0":"post-5397","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-home-loans","8":"entry"},"yoast_head":"\nWhy offset accounts are hitting new highs · FinancialPlus Mortgage Broker Gold Coast<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/financialplus.com.au\/why-offset-accounts-are-hitting-new-highs\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why offset accounts are hitting new highs · FinancialPlus Mortgage Broker Gold Coast\" \/>\n<meta property=\"og:description\" content=\"Spare cash can be tight right now (cost of living crunch, anyone?). But if you\u2019ve still got some savings plus a home loan, there\u2019s a way you could make your surplus funds work harder. Ever heard of an offset account? 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