Caught in the whirlwind of high interest rates, a thriving property market, and escalating living costs, a significant number of Australian homeowners are finding it increasingly difficult to manage their mortgage repayments.
A recent survey by Mozo involving 2,129 participants revealed that 75% of borrowers are worried about their mortgage obligations, with 15% categorising their concern as “extreme.”
The financial landscape for homeowners has drastically changed as evidenced by the doubling of the average variable rate in Mozo’s records from May 2022 to January 2025.
Homeowners with a $600,000 mortgage now find themselves paying an additional $1,286 each month – a steep increase that places considerable strain on household budgets.
In light of these challenges, more than half of the survey’s respondents (54%) have turned to offset accounts as a strategic response to mitigate rising mortgage costs.
SIxteen per cent of these individuals have accumulated between $0 and $10,000 in their offset accounts.
Meanwhile, a more financially equipped segment, constituting 37% of borrowers, reported having between $10,000 to over $200,000 saved in their offset accounts, showcasing a broad spectrum of savings and financial planning, Mozo reported.
Rachel Wastell (pictured above), a finance expert from Mozo, addressed a widespread misunderstanding about the function of offset accounts.
“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 highlighted that one in six people do not utilise offset accounts due to a perceived lack of extra savings, unaware that these accounts can operate just like regular transaction accounts, accommodating daily expenses and salary deposits.
Offset accounts offer more than just an emergency fund; they are a practical financial tool that can significantly reduce the cost of a mortgage over time.
For instance, an average balance of $5,000 in an offset account on a $500,000 loan with a 6% interest rate can cut down the loan term by eight months and save $24,453 in interest, Mozo said.
This example underlines the effectiveness of offset accounts in not only managing but also optimising home loan repayments.
As economic conditions continue to challenge Australian homeowners, the strategic use of offset accounts provides a viable pathway to manage and reduce mortgage-related financial pressures.
These accounts enable homeowners to leverage their regular cash flow for significant long-term benefits, offering both immediate relief and future financial stability in an uncertain economic environment.
For more information, visit the Mozo website.
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