The easiest way to use offset with a fixed rate

Most lenders don't allow offset accounts with fixed rate home loans.

That creates a choice. You can lock in rate certainty with a fixed loan, or you can save on interest with an offset account attached to a variable rate loan. For many people, the most practical option sits somewhere in between.

Why most fixed rate loans don't include offset

Fixed rate loans are priced based on the lender's funding costs at the time you lock in. An offset account reduces the balance on which you're charged interest, which means the lender can't predict their return over the fixed period. To manage that risk, most lenders either exclude offset accounts entirely or offer them with a higher fixed interest rate.

A small number of lenders do allow offset on fixed loans, but the rate is typically higher than a fixed loan without offset, and higher than a variable loan with offset. The benefit rarely justifies the cost.

How a split loan gives you both features

A split loan divides your total loan amount into two portions. One portion is fixed, giving you predictable repayments. The other is variable with an offset account attached, so any funds you keep in that account reduce the interest you're charged on the variable portion.

Consider a buyer with a loan amount of $600,000. They fix $400,000 at a locked rate for three years, giving them certainty on two-thirds of their repayments. The remaining $200,000 stays variable with a linked offset account. If they keep $30,000 in the offset, they're only charged interest on $170,000 of the variable portion. The fixed portion remains unaffected.

The split doesn't have to be even. The right proportion depends on how much you expect to keep in offset, how stable your income is, and how important rate certainty is over the next few years. We regularly see splits ranging from 50/50 to 80/20 fixed.

When offset delivers the most value

An offset account is most useful when you're holding a significant balance on a regular basis. That might be income between pay cycles, a buffer for irregular expenses, or savings you're building toward something specific but don't want to lock away.

If your offset balance sits below $10,000 most of the time, the interest saving is modest. At current variable rates, $10,000 in offset might save you around $50 to $60 a month. If you're paying a higher rate or an annual fee for the offset feature, the value diminishes quickly.

Some people use offset as a way to build equity faster without committing to higher repayments. Instead of increasing your regular payment, you funnel extra funds into the offset account. You get the same interest saving as if you'd paid the money directly off the loan, but you can withdraw it if circumstances change.

What happens when your fixed rate expires

When the fixed period ends, that portion of your loan reverts to the lender's variable rate unless you lock in another fixed term. At that point, you have the option to restructure. You could fix again, move the whole loan to variable with offset, or keep the split in place with different proportions.

If interest rates have moved significantly during your fixed term, the variable portion of your loan gives you a reference point. You'll have been making variable repayments throughout, so you'll know whether the revert rate on the fixed portion is workable or whether it makes sense to refinance to a different lender.

Split loans and loan structure flexibility

A split structure also gives you more control if you want to make extra repayments during the fixed period. Fixed loans typically limit additional repayments to around $10,000 to $30,000 per year without incurring break costs. Anything beyond that cap can be directed to the variable portion or held in the offset account, where it reduces interest without restriction.

In a scenario where someone receives a bonus, an inheritance, or the sale proceeds from another property, the split structure allows them to apply those funds in the most tax-effective and flexible way. Paying down the variable portion reduces the loan balance permanently. Holding funds in offset provides the same interest benefit but keeps the money accessible.

For people with irregular income or those building an investment portfolio, that access matters. You're not choosing between saving interest and maintaining liquidity. The offset account lets you do both.

Comparing loan products with and without offset

Not all variable loans include offset as standard. Some lenders offer basic variable loans at a lower rate but without offset or redraw. Others bundle offset into a package with a slightly higher rate and an annual fee.

When comparing home loan options, the headline rate is only part of the picture. A loan with a rate 0.15% higher but with offset included will often outperform a lower-rate loan without offset, assuming you're keeping a meaningful balance in the account.

The same applies when comparing fixed rates. A lender offering a slightly higher fixed rate but better flexibility on the variable split, or lower fees, can end up costing less over the life of the loan. Rate discounts matter, but structure and features often matter more.

Setting up a split loan from the start

Most lenders allow you to split your loan at the time you apply for a home loan, whether that's for purchase or refinance. You nominate the split percentage, and the lender sets up two loan accounts under the one mortgage. Each portion has its own balance, rate, and repayment amount, but both are secured by the same property.

Some lenders let you adjust the split later, but others require you to refinance if you want to change the structure. It's worth thinking through your likely needs before you settle, rather than assuming you can adjust it down the line.

If you're not sure what split makes sense, your broker can model different scenarios based on your income, expenses, and how much you're likely to hold in offset. That gives you a clearer view of how each structure performs under different conditions, including what happens if rates move or your circumstances change.

Call one of our team or book an appointment at a time that works for you. We'll talk through your loan amount, your goals, and how a split structure with offset could fit your situation.

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