---
title: Living Expenses and HEM Benchmark Explained | GNT Finance
description: What the Household Expenditure Measure is, how lenders compare it with your declared living expenses, and exactly what a 90-day statement review picks up.
url: https://gntfinance.com.au/guides/living-expenses-and-hem-explained/
section: guides
updated: 2026-09-02
author: Gorakh Timilsina, GNT Finance
---

# Living expenses and HEM explained

**In short:** The Household Expenditure Measure is a benchmark of what a household like yours typically spends. Lenders compare your declared living expenses with the benchmark and assess you on the higher of the two, so understating your spending achieves nothing. The benchmark scales with your income, your household size and the number of dependants, and your last 90 days of transactions are checked against it.

Living expenses are where more borrowing capacity is quietly lost than anywhere else on an application. Not because people spend too much, but because they declare a figure that does not survive contact with their own bank statements. This page explains what the benchmark actually is, why the law requires the check, and what an assessor sees when they open your last 90 days.

## What the Household Expenditure Measure is

The Household Expenditure Measure, universally shortened to HEM, is a benchmark of household spending produced by the Melbourne Institute of Applied Economic and Social Research and updated quarterly. It is built from national survey data on what Australian households actually spend.

Three things about it are worth understanding properly.

- **It is not a poverty line and it is not a budget.** It represents a modest but realistic level of spending, covering essentials in full plus a restrained allowance for discretionary items.
- **It scales.** A HEM figure is not one number. It varies by household income, by household composition (single, couple, single with dependants, couple with dependants), by the number of dependants, and by broad location factors. A couple with two children on $180,000 has a materially higher benchmark than a single person on $70,000, because higher-earning households are observed to spend more.
- **It excludes some things.** The benchmark generally covers day-to-day living: groceries, utilities, transport, insurance, medical, clothing, communications, recreation. It does not cover your rent or mortgage, your existing loan repayments, childcare, private school fees, investment property costs or child support. Those are assessed separately, on top.

That last point catches people out constantly. Telling a lender your living expenses are $3,000 a month and then discovering that childcare, school fees and your investment property outgoings are added on top of the benchmark, not absorbed into it, is a common and unpleasant surprise late in an application.

## Why lenders must do this at all

Under the National Credit Code and the responsible lending obligations in the National Consumer Credit Protection Act 2009, a lender or broker must make reasonable inquiries into your requirements, objectives and financial situation, take reasonable steps to verify that situation, and then assess whether the credit contract is not unsuitable for you. That is the legal engine behind the bank statement request. The regulator has been explicit that a benchmark comparison is not a substitute for verification, so most lenders do both: the assessment lands on the higher of your declaration and the benchmark, cross-checked against your transactions.

Your broker sits inside the same framework and owes you a separate obligation on top of it. See [the National Consumer Credit Protection Act explained](/legal/national-consumer-credit-protection-act/) and [best interests duty for mortgage brokers](/legal/best-interests-duty-mortgage-brokers/).

## How the comparison works

| Step | What happens |
|---|---|
| 1. You declare | You complete an expense declaration, usually broken into 10–15 categories |
| 2. The system calculates HEM | Based on your income, household composition, dependants and location factors |
| 3. The higher figure is taken | If your declaration is below the benchmark, the benchmark is used |
| 4. Statements are reviewed | Typically 90 days of transaction data across all accounts |
| 5. Additional costs are added | Childcare, school fees, child support, existing repayments, strata, investment property costs |
| 6. The surplus is buffered | The remainder is tested against repayments at your rate plus 3 percentage points |

The one-line summary from the credit side: **declaring low does not help, and declaring inconsistently hurts.** The benchmark is your floor. Your statements are your ceiling. The only thing your declaration can do is push the number up, or damage your credibility if it does not match what the statements show.

## What a 90-day statement review actually picks up

This is the part applicants underestimate. An assessor is not skimming. Statement analysis is largely automated now, with transactions categorised and flagged, and a human reviews the flags. Here is what surfaces.

- **Gambling.** Any transaction to a betting or casino operator is flagged, including small recreational amounts. Regular gambling is one of the fastest routes to a decline, and it is not treated as ordinary discretionary spending.
- **Buy now pay later.** Instalment debits are identified by the payee name and counted, and the pattern tells the assessor how many active accounts you have even if you did not disclose them. See [buy now pay later and your home loan](/guides/buy-now-pay-later-and-your-home-loan/).
- **Undisclosed debts.** A regular fixed debit to a lender or finance company that does not appear on your application is a serious problem. It is both a liability you did not declare and evidence that the rest of the form may be incomplete.
- **Dishonours and overdrawn fees.** A dishonoured direct debit is read as a cash-flow failure. Several in 90 days will sink an otherwise good file.
- **Unexplained deposits.** Money arriving from an unidentified source triggers questions about undisclosed borrowing or gifted funds. If a family member is helping, document it properly; see [genuine savings explained](/guides/genuine-savings-explained/).

## Worked example: what an expense figure is worth

Nikhil and Anjali have a combined income of $165,000, two children, and are looking in Craigieburn. They declare living expenses of $4,200 a month.

- The HEM benchmark for a couple with two dependants at their income comes out at, for illustration, **$5,100 a month**. Because it is higher than their declaration, the lender starts there.
- The 90-day statement review shows actual day-to-day spending averaging **$5,600 a month**, once a one-off holiday and a car repair are excluded. The lender assesses on **$5,600**.

The step from $5,100 to $5,600 is $500 a month. At a rate of 6.00% p.a. assessed with the APRA buffer of 3 percentage points, the assessment rate is 9.00%, and over a 30-year term $1 of monthly surplus supports about $124 of loan.

**$500 × 124 = about $62,000 of borrowing capacity.**

And the step from their optimistic $4,200 declaration to the $5,100 benchmark bought them nothing at all, because the benchmark is a floor. Declaring $4,200 did not save them $900 a month; it simply told the assessor their self-knowledge was $1,400 a month out.

Now run it the other way. If, over the three months before applying, they had cancelled $180 a month of unused subscriptions, cut two food delivery habits worth $220 a month and moved a $100 a month gym membership they never used, their assessed figure would have come in nearer $5,100.

**$500 × 124 = about $62,000 recovered**, for three months of ordinary tidying. These figures are illustrative and every lender's benchmark table and calculator differs. Use the [borrowing power calculator](/calculators/borrowing-power/) for a starting point, and read [how to improve borrowing power](/guides/how-to-improve-borrowing-power/) for the liability side of the same equation.

## How to declare expenses properly

- **Work from your actual statements.** Download 90 days, categorise them, and declare what you find. Then round up, not down.
- **Exclude genuine one-offs, and say so.** A wedding, a medical procedure or an overseas trip is not recurring. Note it in writing so the assessor does not annualise it.
- **Do not declare below the benchmark and hope.** It cannot help you and it can cost you credibility on everything else.
- **Give yourself a clean 90 days.** No new credit facilities, no dishonours, no gambling, every account in credit. This window matters more than almost anything else you can control.

## Frequently asked questions

### What is HEM in a home loan application?

HEM stands for Household Expenditure Measure, a benchmark of typical household spending published quarterly by the Melbourne Institute. Lenders use it to sanity-check the living expenses you declare. It scales with your income, household composition and number of dependants. If your declared expenses fall below the benchmark, most lenders assess you on the benchmark instead.

### Can I just declare low living expenses to borrow more?

No. The benchmark acts as a floor, so a declaration below it is simply replaced. Worse, your last 90 days of transactions are reviewed, and a declaration well below what the statements show damages your credibility on the entire application, including your income and liabilities. Declare accurately and reduce the actual spending instead.

### How far back do lenders look at bank statements?

Ninety days is the standard request, across all your transaction and savings accounts, and often your credit card statements too. Some lenders request six months where income is variable or the deposit history needs verifying. Statements are usually retrieved digitally with your consent rather than uploaded as PDFs, which means the full transaction detail is visible.

### Does gambling affect a home loan application?

It can, substantially. Betting transactions are flagged automatically, and regular gambling is treated as a risk indicator rather than as ordinary entertainment spending. Occasional small amounts are usually survivable on an otherwise strong file. Frequent activity, or amounts that are material against your income, will often result in a decline regardless of how good the rest of the application is.

## Talk to GNT Finance

Nobody enjoys handing over 90 days of their transactions. But an assessor is not judging your coffee habit, they are looking for volatility and undisclosed commitments, and both can be dealt with before you apply. Gorakh Timilsina reviewed these statements from the credit side for years, so GNT Finance can tell you what your file will look like on the other desk before it gets there. There is no cost to you for our home-loan service in most cases. [Book a free consultation](/contact/) or call 0426 403 703.

*This page is general information only and not legal, tax or financial advice. Lender policy and benchmark figures vary and change without notice; we confirm the current position before you apply.*