HEM Living Expenses
Floor Diagnostic Tool
Lenders assess your living expenses at the higher of your declared budget or a benchmark (HEM). See how your declared spending compares with an illustrative benchmark floor, and how the higher-of figure shapes your borrowing capacity.
✅ Current as of 17 June 2026 · estimate only · not a credit quote
Your Numbers
The Higher-Of Comparison
Below the benchmark — many lenders may assess the higher figure
Because your declared budget is below the illustrative benchmark, many lenders would assess your living expenses at $4,500/mo — about $500/mo more than you declared. As a rough guide, every $500/mo of assessed living expenses ties up around $59,463 of borrowing power (illustrative 9.5% rate, 30-year term).
Walkthrough video — coming soon
A short walkthrough showing how the assessed expenses and benchmark floors shift dynamically will live here.
Open Banking Sees Everything: Why an Accurate Expense Picture Matters More Than a Low One
Lenders no longer rely only on what you write down. With open banking, they can review your actual transaction data — so the goal isn't to declare the lowest possible expenses, it's to declare the right ones. Under-stating spending doesn't help; it gets picked up. And it cuts both ways: applicants often forget genuine recurring costs (subscriptions, insurances, BNPL, school fees, pet care), which can make an application look inconsistent with the bank statements behind it.
Lenders also apply a benchmark called the Household Expenditure Measure (HEM) as a minimum. If your declared spending sits below it, many lenders will assess you against the higher figure. Different lenders apply HEM differently, which is where lender choice matters.
The Income Band Effect on Living-Expense Assessment
The HEM benchmark isn't a single number applied equally to everyone — it generally scales with household income and dependants:
- Higher income, higher assumed floor: Lenders typically assume higher-earning households spend more, so the benchmark applied can be well above a lower-income household's, even with similar grocery and utility costs.
- Dependants: Each child or dependant generally lifts the benchmark.
This is why a frugal high earner can still be assessed on a higher expense figure than they actually spend.
How we help
We help you build a complete, accurate expense picture so there are no surprises when your statements are reviewed — and match you to the lender whose policy genuinely fits your real circumstances. We never help anyone understate expenses; accurate disclosure is a responsible-lending requirement and it protects you.
Built by Virginia Graham Riches, founder of Model Mortgages, supported by a specialist team of five mortgage brokers.
Frequently asked questions
What is the Household Expenditure Measure (HEM) and why do lenders use it?
The Household Expenditure Measure (HEM) is a statistical benchmark developed by the Melbourne Institute. It estimates standard living expenses for different household types in Australia based on location, family size, and income bands. Under responsible lending obligations, lenders use HEM as a minimum floor. If your declared living expenses are lower than this benchmark, many lenders will assess your application using the higher HEM figure.
Why does the HEM benchmark floor scale with household income?
Lenders commonly assume that higher-earning households spend more on transport, utilities, groceries, and leisure — an effect sometimes described as "lifestyle creep." As a result, the benchmark applied generally rises with household income, even if a household maintains a frugal lifestyle. The exact scaling varies by lender and is not a fixed or public figure, so the floor in this tool is an editable, illustrative placeholder rather than a real HEM table.
How does an override of my living expenses affect my borrowing capacity?
If your declared expenses sit below a lender’s benchmark, many lenders assess you on the higher figure, so the difference is effectively added to your assessed monthly outgoings and reduces the surplus income available to service a mortgage. Using a sample 9.5% assessment rate over a 30-year term, every extra dollar of assessed monthly expenses reduces your estimated maximum borrowing capacity. Actual figures vary by lender and circumstances.
How can Open Banking impact my expense declaration?
With the rollout of open banking in Australia, lenders can directly inspect transaction history on your bank statements rather than relying solely on manual budgets. Under-declaring expenses does not help and can trigger compliance flags if it conflicts with actual transaction data. Conversely, applicants often forget genuine recurring expenses (such as streaming subscriptions, BNPL, or school fees), leading to inconsistencies. The goal is to build an accurate, complete picture of your commitments before applying.
Your real borrowing outcome depends on all five assessment pillars working together — income, expenses, assets, security and borrower profile. A strong result in one pillar can be cancelled out by a constraint in another.
To see how this fits your whole position — your full servicing picture on one side and this scenario on the other — and which other pillars are helping or holding you back, run the full diagnostic at Structur.