Offset mortgages in NZ: how they work and which banks offer them

An offset mortgage links your everyday and savings accounts to your home loan. Instead of earning interest, the money in those accounts is subtracted from the loan balance before interest is charged. With $30,000 linked to a $500,000 loan at 6.25% (Kiwibank’s advertised offset rate, as at 10 November 2026) you pay interest on $470,000, which saves $156.25 a month. Keep that $30,000 linked for the life of a 30-year loan and, with the same repayments, the loan is cleared about 4 years 6 months sooner. In New Zealand, BNZ, Kiwibank and Westpac offer offset loans; ASB says it does not. The trade-off is the rate: offset loans are floating, and floating rates averaged 6.31% against 5.06% for one-year fixed, as at 10 November 2026.

How an offset loan works

With an ordinary loan, interest is charged on the full amount you owe, and any savings you hold earn interest separately. With an offset loan, the bank adds up the balances in your linked accounts and takes that total off the loan balance first. Interest is charged only on what is left.

Kiwibank states its offset ratio is 1: “for every $1 held in an offset account, $1 of lending is offset.” So the maths is simple:

Balance charged interest = loan balance less linked account balances

Your money stays yours and stays in your accounts. You can spend it whenever you like; when you do, the offset falls and the interest rises a little. Because interest is worked out daily, what matters is the balance sitting in the linked accounts each day. Kiwibank says “Interest is calculated daily, so the more you have in your linked accounts day-to-day, the more you’ll save.” (Our guide to how banks calculate interest explains daily accrual.)

Your repayment usually stays the same. Because less interest is charged, more of each repayment goes to the loan itself, so the balance falls faster and the loan finishes early. That is where most of the long-run saving comes from.

Which NZ banks offer offset loans

Among the five largest banks, in alphabetical order, as at 10 November 2026:

Rates are from the interest.co.nz table, as at 10 November 2026. All three offset products are floating, so the rate can change at any time. Smaller banks and building societies may offer offset too; we have not checked them.

Worked example: $30,000 against a $500,000 loan

Take a $500,000 offset loan with $30,000 kept in linked accounts. Here is the monthly interest at each bank’s advertised offset rate (as at 10 November 2026), on the simple monthly method (rate divided by 12):

Note what is happening: you are not earning interest on the $30,000, you are avoiding interest on the loan at the loan rate. A savings account paying less than the loan rate cannot match that.

Over the life of the loan

The bigger effect comes from keeping the repayment the same. A $500,000 loan at 6.25% over 30 years has a repayment of $3,078.59 a month and costs $608,288.19 in interest. If a linked balance stayed at the same level the whole way through, the loan would finish early:

“Cleared” here means the loan balance has fallen to the amount in your linked accounts, so you could pay it off with your savings that day. These figures assume the rate stays at 6.25% for 30 years, which it will not, and that the linked balance never changes. They show the size of the effect, not a prediction. Try your own numbers in our repayment calculator by entering the loan less your typical savings balance.

The catch: floating rates cost more than fixed

Offset loans are floating, and floating rates are usually above fixed specials. As at 10 November 2026, the average advertised floating rate across the five largest banks was 6.31%, against 5.06% for one-year fixed and 5.35% for two-year fixed.

So an offset only wins on cost if your linked savings are large enough to make up for the higher rate. On a $500,000 loan, the gap between 6.25% (offset) and 5.06% (one-year fixed average) is worth $495.83 a month in interest. To save that much through the offset at 6.25%, you would need about $95,200 sitting in linked accounts. Few households keep that much in cash.

That is why most people who use offset split their loan. Put most of the debt on a fixed rate and only part on offset, sized to your typical savings. On a $100,000 offset part at 6.25% with $30,000 linked, interest is $364.58 a month, against $421.67 for the same $100,000 fixed at 5.06%. The break-even linked balance for that $100,000 part is about $19,040. Our guides to split loans and fixed vs floating go further.

Getting the most from an offset

An offset rewards money that sits still. A few habits make a noticeable difference:

• Link every eligible account. Check which accounts your bank allows. Kiwibank, for example, links new offset loans only to its Free Up and Now accounts, up to eight of them; savings in other account types do not count.
• Have your pay go straight in. Income in a linked account starts reducing interest the day it arrives, because interest is worked out daily.
• Spend on a credit card, pay it in full. Paying the card in full on the due date lets your pay sit in the linked account for a few more weeks without adding card interest. It only helps if you never carry a balance.
• Size the offset part to your savings. If your offset part is larger than your typical linked balance, the extra sits at the floating rate for no benefit. Review it at each refix of the rest of the loan.
• Watch the rate. Offset rates are variable and can change at any time. Compare yours with fixed rates on our mortgage rates page now and then.

Keep in mind that the benefit falls whenever you spend the savings. An offset is a good home for an emergency fund precisely because the money stays available, but if the balance is regularly run down, the saving shrinks with it.

Who offset tends to suit

• People with savings they want to keep at hand, such as an emergency fund, money set aside for tax (self-employed people and landlords), or a house deposit for a next move.
• Families who can link accounts. BNZ, and per a summary of Westpac’s page, Westpac, allow family members’ accounts to be linked, which can help a relative without giving them money outright.
• People who want flexibility without the temptation of an overdraft limit. Unlike revolving credit, the offset loan itself is not a pool of money to redraw; only your own savings move.

Offset suits less well if your linked balances would be small, because you pay a floating rate for little benefit, or if you want certainty about repayments. A fixed loan with extra repayments may get you to the same place more cheaply. Our paying off your mortgage early guide compares the approaches.

This is general information, not financial advice. Rates as at 10 November 2026; check the bank’s current terms before you decide.

Questions people ask

Do linked accounts earn interest?

Generally no. The benefit is the interest you avoid on the loan instead. A summary of Westpac’s page says linked accounts stop earning interest; Kiwibank’s page describes the benefit only as reduced loan interest.

Can I have an offset on a fixed rate?

Not at the major banks we checked. BNZ TotalMoney, Kiwibank Offset Mortgage and Westpac Choices Offset are all floating. You can fix part of the loan and keep part on offset with a split.

Does ASB or ANZ offer an offset mortgage?

ASB says it does not, and points customers to its Orbit revolving loan. We found no ANZ New Zealand offset product; ANZ offers a revolving Flexible Home Loan.

How much does $10,000 in an offset account save?

At 6.25%, about $52 a month in interest at first ($10,000 × 6.25% ÷ 12). Kept linked for a whole 30-year $500,000 loan, with the same repayment, it saves $51,730 and clears the loan 1 year 8 months sooner, if the rate never changed.