HEM, the Household Expenditure Measure, is a benchmark of modest household living costs produced by the Melbourne Institute at the University of Melbourne. Lenders compare the living expenses you declare with the HEM figure for a household like yours and generally use the higher of the two when they work out how much you can borrow.

What does HEM actually measure?

HEM is built from the Australian Bureau of Statistics Household Expenditure Survey. Spending is sorted into absolute basics, discretionary basics and everything else, and the benchmark is the median spend on absolute basics plus the 25th percentile spend on discretionary basics. In plain terms, it is what a household spends living modestly, not what a typical household spends.

  • It varies by household. Single or couple, the number of dependants, where you live and your income band all change the figure.
  • It moves every quarter. The Melbourne Institute updates it after each Consumer Price Index release.
  • It leaves out housing. Rent and mortgage repayments are not part of the benchmark; the lender assesses the new loan separately.
  • It is not published as a public table. The quarterly figures are sold by subscription, so lenders apply it inside their own calculators.

How do lenders use HEM?

You declare your living expenses in the application, and the lender checks them against your bank statements. It then compares your figure with the HEM figure for your household and usually uses whichever is higher. Your existing debts are assessed on top of that, not inside it: card limits, car and personal loans, buy now pay later, HECS-HELP repayments and child support.

Responsible lending laws require a lender to make reasonable inquiries about your financial situation and to verify it. A benchmark is a check on what you declare; it does not replace looking at your actual spending.

Why might a lender use a figure higher than HEM?

Declared expenses, the benchmark and what the lender counts
Your situation What the lender usually does
You declare less than the benchmark Uses the benchmark
You declare more than the benchmark Uses your figure
Your statements show more spending than you declared Asks questions and may use the statements
A cost stops at settlement, such as the rent you pay now Leaves it out, once you show it will end
A cost starts after you buy, such as strata levies Adds it to the assessment

How much do living costs change your borrowing power?

Every dollar a lender counts as a living cost is a dollar that cannot go towards repayments. At an assessment rate of 9% (the 6% example rate plus the 3 percentage point serviceability buffer) over 30 years, each $100 a month of repayment capacity supports about $12,400 of loan.

Extra assessed living costs and the loan they use up
Extra living costs a month Less borrowing power, about
$100 $12,400
$300 $37,300
$500 $62,100

This is a simple surplus test. Real lender calculators add other adjustments, but the direction is the same: a household whose spending sits well above the benchmark can borrow noticeably less than a household on the same income whose spending sits near it. The borrowing power calculator lets you change the living cost figure and see the effect.

What do lenders look for in your bank statements?

  • Regular spending that does not match the expenses you declared.
  • Repayments to debts you did not list, including buy now pay later.
  • Dishonours and overdrawn accounts, which suggest a tight budget.
  • Gambling transactions, which many lenders treat as a living cost.
  • Subscriptions and memberships that add up across a month.

Can you lower your assessed living expenses before applying?

Yes, but only by spending less, not by declaring less. Understating expenses is a misrepresentation, and the statements usually show it anyway. Steps that genuinely help:

  1. Trim discretionary spending for the three months or so before you apply, so your statements match a lower figure.
  2. Cancel subscriptions you do not use.
  3. Close credit cards you do not need. Card limits are assessed as a commitment even with a nil balance.
  4. Clear buy now pay later balances and close the accounts.
  5. Keep savings and spending in separate accounts, so the statements are easy to read.

The guide on how to increase borrowing power covers the other levers, from debts to income evidence.

Does HEM differ for singles, couples and families?

Yes. A couple has a higher benchmark than a single person, and each dependant adds to it. Income matters too: the benchmark rises with income, so two households with the same family size but different incomes are tested against different figures. Single parents carry the costs of a family on one income, which is why single parent home loans are often about choosing the lender whose assessment fits.

Is HEM the same at every lender?

No. Lenders build the benchmark into their own serviceability models in different ways, and some use their own expense measures instead. Two lenders can look at the same household and count different living costs, which is one reason borrowing power varies between lenders on identical numbers. The borrowing power assessment explains how those models differ.

Which costs sit outside HEM?

  • Housing costs, because the new loan is assessed on its own.
  • Debt repayments, assessed as commitments.
  • HECS-HELP, assessed from your income as a compulsory repayment.
  • Child support and spousal maintenance, assessed as commitments.

Some lenders also add costs such as private school fees on top of the benchmark, so declare them accurately rather than assume they are covered.

Questions people ask

Is HEM the same as my actual spending?

No. It is a modest benchmark. Your actual spending may be higher or lower, and the lender usually counts the higher of the two.

Can a lender decline me because my spending is too high?

Yes. If your declared or verified expenses leave too little surplus for the loan at the assessment rate, the lender can reduce the amount or decline the application.

How do I find out my HEM figure?

The tables are not public. A broker can run your income, household and declared expenses through lender calculators and show you where the benchmark sits for you.

Charles Touma runs your declared expenses and the benchmark through lender calculators before you apply, so the amount you are pre-approved for is one that holds up. A free 30-minute call covers your budget and what each lender is likely to count. General information only, not credit advice. Sources: Melbourne Institute, Household Expenditure Measure methodology and quarterly updates, checked 17 October 2026. Example figures use the 6% example rate plus a 3 percentage point buffer over 30 years.

General information only, not credit, legal or tax advice. Your situation is assessed properly before any recommendation. Government scheme details change; figures are current at the time of writing.