Offset accounts linked to home loans are meant to save money by reducing your interest bill but borrowers are being overcharged hundreds sometimes thousands of dollars because of bank errors in setting them up. What's more, some borrowers will be none the wiser because they never check their lender's interest calculations.

Banks say such mistakes are unusual but experts point out it's largely up to borrowers to uncover the errors.

An offset account is a savings account linked to your home loan, the balance of which is offset against your outstanding mortgage. For example, if you have $300,000 outstanding on your home loan but $10,000 in an offset account, you should be charged interest on $290,000.

Former ANZ customer Mark Leeming contacted Money after being overcharged interest on his home loan for a second time. On both occasions, the fault was the result of problems with his offset account.

"When I first took out my mortgage in 2005, after a few months I suspected the interest accruing wasn't decreasing to reflect the amounts I had put in the offset account," Leeming says. "It turned out ANZ had overcharged interest of $3223.40 for the first four months of the mortgage."

When told of the problem, ANZ apologised promptly and refunded the overpaid interest.

"Then the same thing happened when I paid off the same mortgage a few weeks ago," he says. "ANZ provided a settlement amount and only after I saw the statement and checked it, did I see that, once again, ANZ had failed to allow for the amounts in the offset account. This time, it had overcharged me $554.60," he says.

Again, ANZ apologised and refunded the money.

While the bank had forgotten to credit his offset amounts, Leeming says it never forgot to charge the $340 annual fee for having a home-loan package with a full offset facility attached.

Nicholas Gruen, an economist and chief executive of mortgage broker Peach Financial, says the problem is there's no disincentive for banks to overcharge. "If they get caught, they simply refund the money they've made," he says.

"Ultimately, the way to solve the problem would be for banks to incur some additional liability to you if they overcharge you. The idea would be to balance the scales and make them just as keen to avoid overcharging as they are to avoid undercharging."

Leeming says he suspects the letter from the bank acknowledging his complaint is a "standard letter", as it says things that don't correlate with his circumstances. This suggests to him that miscalculations might be common.

Of course, there's no evidence that ANZ makes any more mistakes than any other lender. But Mortgage Watchdog director David Gray says his experience is that offset accounts have by far the highest incidence of error, based on reports from buyers of his mortgage-checking software.

"That's mainly because there are two accounts involved, so there's greater potential for error. Often banks just don't set them up correctly. They forget to offset the offset," Gray says.

Line-of-credit loans in which borrowers use their mortgage accounts virtually as a transaction account are second in line as the biggest source of errors because of the extra activity involved, he says.

Peach Financial says the non-delivery of negotiated discounts such as those offered on "premium" home-loan packages is another problem area.

The senior corporate affairs manager at Mortgage Choice, Kristy Sheppard, checked with franchisees and quickly found plenty of instances in which brokers had intervened on behalf of clients because problems with offset accounts had been identified.

Sheppard says the errors commonly occur at the start of a loan and when borrowers restructure loans.

"Borrowers need to take ownership of their home loan and monitor the account each month to make sure the correct repayments are being taken out and the offset account is having what looks to be the right effect," she says. "If something looks awry, they need to call their lender ASAP."

A Mortgage Choice franchise owner in Granville, Anne Boulton, says: "We encourage clients to ensure their account has actually been linked to their loan after settlement, as we've had times when the lenders haven't linked them. Also, we've had a case ... in which the link in the offset just dropped off a year or so into the loan." Boulton also has experience of the offset link dropping off when a fixed-rate term expires and the loan reverts to a variable rate.

Another broker says an offset facility became "lost" when a loan was restructured as a split loan combining fixed and variable rates.

Kevin McCann, of Mortgage Choice in Mount Waverley, Melbourne, says in his experience, lenders make the necessary adjustments once they're shown to be in error. "[But] it's up to the customer to discover any problems. That's how most of these things remain undiscovered."

An ANZ spokesman says such mistakes are unusual but acknowledges there is room for error because parts of the process are manual.

"They're a relatively small number given the hundreds of thousands of accounts, however we would encourage customers to review their statements to ensure transactions, interest and fees are in order."

Leeming says although tedious, checking his interest bill was fairly easy.

Armed with his home loan and offset account statements and a calculator, he identified when interest was debited to determine his mortgage "month".

Let's say the debit happens on the 12th of each month. On that basis, the mortgage "month" is from the 13th to the 12th of the following month.

He then determined the average amount owing on the mortgage throughout that month and the average amount in his offset account over the same period. Next, he subtracted the offset average from the home-loan average to find the amount on which interest should have been calculated.

Finally, he multiplied that amount by the interest rate, dividing it by 365 days then multiplying it by 30 days to come up with a monthly figure.

"If the answer is approximately the interest debited for that month, then [the lender] has probably correctly calculated your interest," Leeming says. But his calculations prompted him to ask ANZ for an "interest reconstruction" and an error was confirmed.