What is HEM? - Household Expenditure Measure 🐾
When applying for a home loan, lenders don’t just look at your income — they also need to understand your living expenses.
That’s where the Household Expenditure Measure (HEM) comes in.
What HEM Is
HEM is a standardised benchmark used by lenders to estimate a borrower’s minimum reasonable living costs.
It’s based on data from the Australian Bureau of Statistics and takes into account factors like:
Household size
Number of dependants
Location (metro vs. regional)
Lifestyle category (basic, moderate, lavish)
Even if you tell your broker you live on two-minute noodles and instant coffee, the bank will still apply a minimum HEM amount to ensure your budget is realistic, but if you’re expenses are lower, we can talk about making additional repayments to decrease the life of the loan.
Why Lenders Use It
HEM helps lenders:
Assess serviceability (whether you can comfortably afford the loan)
Ensure compliance with responsible lending obligations
Reduce the risk of borrowers being approved for more than they can safely repay
It acts as a safety net, setting a floor for living expenses so every applicant is assessed on a consistent basis.
How It Affects Your Borrowing Power
If your declared expenses are lower than the HEM for your household, the lender will use HEM instead.
If your actual spending is higher, they’ll use your real figures.
That means:
A higher HEM (larger family, higher lifestyle) = lower borrowing capacity
A lower HEM (single borrower, modest lifestyle) = higher borrowing capacity
What we / You Can Do
When completing our fact find or your looking at your budget:
Be honest about your regular spending.
Review your expenses before applying — small tweaks can make a difference. (We can help show you areas you’re spending a lot).
Understand that lenders will still apply HEM in the background, even if your numbers differ.
We will always help balance this with your income, goals, and lender policies to find the right fit.