A Structural Model of Mortgage Offset Accounts in the Australian Housing Market

James Graham

The Economic Record, 2026, vol. 102, issue 336, 3-26

Abstract: I study a novel institutional feature of Australian housing markets: the widespread use of mortgage offset accounts. These accounts reduce mortgage interest costs and increase mortgage liquidity. I build a heterogeneous agent life‐cycle model of the Australian housing market to study who uses and benefits from these mortgage products. Households in middle age and with larger incomes, houses, and mortgages are most likely to use offset accounts and generally derive larger benefits from their use. I show that a social planner could maintain mortgage profitability, improve welfare for many households and more evenly distribute benefits by adjusting the price structure of offset accounts.

Date: 2026
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https://doi.org/10.1111/1475-4932.70007

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