In today’s economic climate, where higher interest rates and a higher cost of living are putting pressure on household budgets, many mortgage holders are turning to offset accounts as their “secret weapon” for financial flexibility and long-term savings.
According to NAB Executive for Home Ownership Andy Kerr, the key to maximising the benefits of your offset account lies in three simple principles: Crediting, Consolidating, and Cutting back—also known as the Three Cs.
“Offsets have been the secret weapon through a higher cost of living and interest rate rises,” Mr. Kerr explains.
“They’ve helped mortgage holders get ahead and stay ahead.”
1. Crediting your salary
One of the simplest ways to grow your offset account is to have your salary directly deposited into it.
“Interest is calculated daily, so every single day your pay is in your offset account—even while you’re spending—it’s reducing the interest on your mortgage,” Mr. Kerr says. “This strategy allows you to keep ready access to your cash while blunting some of your interest payment.”
2. Consolidating your savings
If you have funds sitting in multiple accounts, consider pooling them into your offset account.
“Some people have money sitting in different savings accounts earning up to 5% interest,” says Mr. Kerr. “But if your mortgage rate starts with a 6%, using that money to offset your mortgage instead could make a bigger financial impact.”
3. Cutting back where you can
Making thoughtful spending decisions can also boost your offset account.
“We’ve seen more than half of Australians cutting back on things like coffees, lunches out, entertainment, and even car trips,” Mr. Kerr notes. “On average, they’re saving $320 a month or $3,840 a year. Four in ten Australians are using those savings to top up their offsets, helping shave both interest and time off their mortgage.”
Australians Are Growing Their Financial Buffers
Offset accounts are becoming increasingly popular. Since the pandemic, the total amount NAB customers have in offsets has surged by 55%, climbing from $29 billion in 2020 to over $45 billion this year.
Nearly 70% of all new NAB home loan customers are opening an offset account, compared to 50% just two years ago. In the past 12 months, the median monthly deposit into an offset account by NAB customers has been around $4,500.
“Australians have been steadily adding to their offset accounts, which has helped them blunt the impact of interest rate rises and a higher cost of living,” Mr. Kerr says. “At the same time, it’s allowing them to pay off their mortgage sooner while having ready access to cash if and when they need it.”
With the Three Cs of offset account management—Crediting, Consolidating, and Cutting back—you can take charge of your finances and make your offset account a powerful tool for savings and stability.
If you would like to speak to a broker about your account structure, please book a time here today. Alternatively, refinancing may be something to consider. If you would like to see how much you could save on your home loan, click here.
Disclaimer: The 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. Content developed in partnership with IFPA.
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