The premiums lenders charge home loan borrowers for popular offset accounts negate their benefits, according to new research. Comparison site Canstar said the average rate for a home loan with an offset is 39 basis points higher than a loan with a redraw, which offers similar benefits. In the case of the big banks, interest rates on home loans with offsets are up to 143 bps higher than loans with redraws. Offsets and redraws allow borrowers to make extra payments into their mortgage accounts, with the effect of reducing the balance on which monthly interest costs are calculated and accelerating the repayment of principal. Deposits in offsets and redraws can be withdrawn. Offsets are very flexible, allowing account holders to pay their salary into the offset account and use it like a transaction account. Redraws are more limited, such as having minimum amounts for redraw. Lenders can charge for withdrawals from redraw accounts but Canstar said most lenders in its database do not charge. It said all lenders on its database offer unlimited redraws. Among the big banks, the lender with the biggest rate difference between offsets and redraws is NAB, which charges 7.02 per cent for a mortgage with an offset and 5.59 per cent for a mortgage with a redraw – a difference of 143 bps. In the case of ANZ, the difference is 90 bps and for Westpac it is 115 bps. The outlier is Commonwealth Bank which charges only 17 bps more for a mortgage with an offset, compared with a mortgage with a redraw. The market average in the Canstar database is 6.34 per cent for a mortgage with an offset and 5.95 per cent for a mortgage with a redraw – a difference of 39 bps. Canstar finance expert Steve Mickenbecker said: “The additional interest rate being charged for offset accounts is of such a magnitude that the extra benefit over redraw is being negated. “To make offset a logical choice at some of the big banks a borrower would need an abnormally high level of income relative to the size of their loan.” Banks used to offer discounted package loans, which included offsets, but that has changed. ANZ withdraw its package home loan last September and NAB withdrew its package offer last month.