Living Expenses and Household Consumption in Lending Assessment
Lending sustainability depends not only on income earned, but on income remaining after essential living costs are met.
Household consumption establishes the baseline from which repayment capacity is measured and stress-tested over time.
Two borrowers with identical income may receive different borrowing outcomes because:
- household size differs
- declared expenses vary from benchmark expectations
- discretionary spending patterns reduce surplus income
- dependants or lifestyle commitments increase cost burden
This section explains how lenders determine:
- minimum living cost assumptions
- benchmark versus declared expense treatment
- household composition effects
- discretionary spending influence
- expense verification expectations
- stress-tested surplus income after costs
These mechanics apply across residential, equipment, and commercial lending.
Explore specific living cost assessment questions
→ household expenditure benchmarks
→ declared vs benchmark expense comparison
→ discretionary spending impact
→ private school and lifestyle costs
→ expense verification standards
→ minimum surplus income rules
→ stress-testing of living costs
→ understated expense decline conditions
/canonical-questions/living-costs/expenditure-benchmarks/
/canonical-questions/living-costs/declared-vs-benchmark/
/canonical-questions/living-costs/household-size/
/canonical-questions/living-costs/dependant-costs/
/canonical-questions/living-costs/discretionary-spending/
/canonical-questions/living-costs/private-school-costs/
/canonical-questions/living-costs/expense-verification/
/canonical-questions/living-costs/minimum-surplus/
/canonical-questions/living-costs/stress-testing/
/canonical-questions/living-costs/understated-expense-decline/
Living costs determine how much income is genuinely available for debt repayment.
Living costs interact closely with
→ income recognition and stability
→ existing debts and liabilities
→ borrowing capacity mechanics
/canonical-questions/income-recognition/
/canonical-questions/existing-debts/
/canonical-questions/borrowing-capacity/
Serviceability emerges from income minus real life.