When you apply for a home loan, the lender compares the living expenses you declare with a benchmark. APRA’s practice guide APG 223 says banks typically use the Household Expenditure Measure (HEM) or the Henderson Poverty Index, and it expects them to use the greater of your declared figure and a scaled version of the benchmark. You write down your figure. You don’t get to see theirs. That is what this piece is about.
Our HEM explainer covers how the measure is built, what sits inside and outside it, and an indicative table estimated from public ABS data. This piece is the argument.
What HEM is
The Melbourne Institute at the University of Melbourne defines HEM as the median spend on "absolute basics" (most food, children’s clothing, utilities, transport and communications) plus the 25th percentile of spend on "discretionary basics" (take-away and restaurants, alcohol and tobacco, adult clothing, entertainment). It classifies more than 600 items from the ABS Household Expenditure Survey, leaves out rent and mortgage payments, and is updated every quarter with the Consumer Price Index. ASIC says the current version was rebuilt in August 2018 on the 2015-16 survey, and that "the majority of households would spend more than the benchmark figure".
The table you can’t see
HEM is sold to lenders by subscription, which the Melbourne Institute says is available through Perpetual. Burstall (2023, Journal of Australian Political Economy) reports that subscribers must agree not to release the data. An Equifax guide from 2018-19 describes the quarterly files being loaded into lenders’ consumer, mortgage and credit card decision systems. There is no free official HEM table, and none of the lender pages we checked on 8 October 2026 shows the figure. NAB’s and ubank’s calculators say they substitute HEM when the expenses you enter are lower, and Macquarie’s credit guidelines compare declared general living expenses with "the income tiered HEM value".
Lenders layer their own versions on top
HEM itself has no lifestyle tiers: the Melbourne Institute, ASIC’s RG 209 and APRA’s APG 223 describe none. Lenders added their own layers. In April 2018 ABC News reported UBS research that lenders classed borrowers’ lifestyle in four categories, student, basic, moderate and lavish, and that "in the vast majority of cases the ‘basic’ lifestyle assumption is used". The same report said UBS estimated that 70 to 80 per cent of home loans in 2017 used the HEM benchmark. We found no lender page describing lifestyle categories in 2026, so we can’t say whether any lender still uses them.
Other layers are published. APRA says a prudent bank would apply a margin linked to the borrower’s income. Macquarie compares your expenses with an income-tiered HEM figure, and waives its $500 minimum surplus where declared living expenses are at least 120 per cent of HEM. Westpac’s living expenses page says "Each lender has their own formula". The version of the benchmark applied to you is the lender’s, not the Melbourne Institute’s.
The greater-of rule
APRA expects banks to use "the greater of a borrower’s declared living expenses or an appropriately scaled version of the HEM or HPI indices", and says relying solely on the indices would not meet its requirements. ASIC puts the emphasis elsewhere: a benchmark does not verify anything about you (RG 209.136), and "it is not necessary to use a benchmark as a minimum level of expenditure" where a lower figure is verified (RG 209.141). NAB, ubank, Westpac and Macquarie all describe using the higher figure. Declaring less than the benchmark doesn’t raise your borrowing power, and at Macquarie it triggers a request for three months of bank statements.
Landing on the benchmark is common. Broker Daily reported that, as of October 2017, CommBank was defaulting to HEM for 75 per cent of home loan applications, and The Adviser reported that KPMG found 73 per cent of ANZ’s assessments did. CommBank’s chief executive told the Royal Commission that, given how HEM is designed, around 40 or 50 per cent at the floor "should be largely reflective of the underlying expenditure".
Why the hidden number matters
Commissioner Hayne said HEM "should not, and cannot, be used as a substitute for inquiries or verification". In ASIC’s case against Westpac, the courts did not find that using HEM in a serviceability test broke the law: ASIC lost at trial ([2019] FCA 1244) and on appeal ([2020] FCAFC 111). So the benchmark is lawful and it is here to stay for now. What is missing is transparency.
When a borrowing figure comes back lower than you expected, you can’t tell from the outside whether the benchmark caused it, or an income-linked margin, or your card limits (counted at 3 per cent of the limit a month in APRA’s example and 3.8 per cent in Macquarie’s guidelines), or the 3 percentage point serviceability buffer APRA confirmed on 28 May 2026, or a lender’s floor rate. Each of those is a policy choice you could compare between lenders, if you knew which one bit.
Our view: a lender should tell every applicant the living-expense figure used in their assessment, and whether it came from their declaration or the benchmark. It doesn’t need to publish the licensed table to do that.
What to ask your broker
Until that changes, ask. Broker tools show the comparison: Macquarie’s serviceability calculator for brokers flags declared general living expenses below HEM with a red validation message. Six questions worth asking:
- Which living-expense figure did the lender use, my declaration or its benchmark, and roughly how much was it?
- Which costs were added on top? ASIC’s RG 209 lists rent and mortgage payments, private school fees, private health and life insurance, child support and HECS-HELP among the costs outside HEM, and lenders add other loans, card limits and buy now pay later.
- What rate were my card limits counted at? APRA’s example is 3 per cent of the limit a month; Macquarie’s guidelines use 3.8 per cent.
- What assessment rate was used? APRA’s buffer is 3 percentage points, and some lenders also set a floor, such as Macquarie’s minimum assessment rate of 5.30 per cent.
- Would another lender treat my file differently, for example on HECS-HELP (RG 209 lets a lender leave it out in some cases) or strata on my own home, which lenders place differently?
- Which statements do you need? CommBank asks for three months (six if you are casually employed) unless your salary is paid into CommBank; Macquarie needs three months when declared expenses are below HEM.
Disclosure
Licensed brokers who meet our criteria pay Your Finance Guide a partnership fee to receive enquiries from this site. The fee is paid by the broker, not by you, and is not added to your loan. Brokers are usually also paid a commission by the lender when a loan settles. The editorial position in this piece is that borrowers should be told the living-expense figure used in their assessment, whichever channel they apply through. This is a position we hold regardless of the commercial outcome of any specific match.
Correction (8 October 2026): an earlier version of this article said the Melbourne Institute publishes HEM at three lifestyle tiers (basic, modest and lavish), that most lenders default to "modest" and that some apply "lavish" to higher incomes. That was wrong. The Melbourne Institute’s description of HEM has no lifestyle tiers, and the 2018 UBS research reported by ABC News found lenders’ own categories used "basic" in the vast majority of cases. We have rewritten the article and removed figures we could not source.