Your everyday spending patterns can play a part in how lenders assess a loan application.

While every lender has its own policy, understanding the way income, expenses and commitments are reviewed may help you prepare more confidently.

How location can influence HEM benchmarks
Lenders use the Household Expenditure Measure (HEM) to estimate living costs. HEM benchmarks may vary by location, and some lenders may apply different living expense assumptions depending on whether a borrower
lives in a metropolitan, regional or outer urban area.

For example, some lender assessments may apply a higher benchmark in inner city areas than in regional areas.

Lenders may also consider your residential address and supporting documents, such as utility bills or bank statements, when reviewing your application. It’s important that your application information is accurate and reflects your actual living arrangements.

These differences may affect the living expense amount used in serviceability calculations that can in turn affect how a lender assesses borrowing capacity.

Exact outcomes will vary by lender and individual circumstances.

Income presentation and stability
Some lenders may assess irregular income differently from base salary.

  • Overtime, commissions and bonuses may be discounted or assessed conservatively.
  • Some lenders may average income over a period such as two years when assessing whether it is consistent and sustainable.
  • For contractors or casual workers, some lenders may consider earnings over a 12 to 18 month period when assessing income consistency.

If you rent out a spare room or earn income from short term rentals:

  • Some lenders may apply a discount to rental income after allowing for costs and other relevant factors.
  • Keeping clear and separate records of rental income can help support lender assessment, depending on the lender’s requirements.

Outcomes vary by lender, your documentation and your overall financial circumstances.

Debts and commitments to be aware of
Certain debts and credit facilities can affect borrowing capacity, even if you don’t use them regularly.

  • Some lenders may assess unused store cards and credit cards based on the full available limit.
  • If you have unused credit facilities, it is important that your lender has accurate information about your current limits and commitments.
  • Personal loans are often assessed based on repayment obligations and outstanding balances.
  • Buy Now, Pay Later products may be assessed as recurring commitments by some lenders, depending on the lender’s policy and your account history.

These are general observations only. Lender policies vary, and outcomes will depend on the lender’s assessment criteria and your overall financial circumstances

Household composition and dependents
How you document household composition may affect the HEM benchmark applied.

  • Depending on household composition, the HEM benchmark used by a lender may differ.
  • If other adults live in the household, lenders may consider their circumstances as part of the overall assessment, depending on the information provided nd the lender’s policy.
  • For couples, lenders may assess household income and expenditure together, depending on the lender’s policy and the information provided.

This is general information only and is not advice on how to structure your household, income or spending for loan purposes. Lender assessment methods vary.

Timing of your application
Peak spending periods can be visible in your transaction history and may affect how a lender reviews your spending behaviour.

  • EOFY sales, Christmas, school holidays and major travel periods can increase visible spending.
  • If you are considering an application, recent spending patterns may be relevant to a lender’s assessment, depending on the lender’s policy and the timing of your statements.
  • Pre-approval validity periods vary by lender and product.

Outcomes are not guaranteed and depend on your full financial picture and the lender’s criteria.

Different lenders, different approaches
Not all lenders treat HEM and transaction data in exactly the same way.

  • Some lenders may place more weight on certain discretionary expenses, such as dining, entertainment or subscriptions.
  • Lender assessment methods vary and some may place greater emphasis on benchmark expenses such as HEM.
  • Comparing multiple lenders before you apply may help you understand differences in lending policy.

Illustrative example only
Different lender policies may lead to different assessed borrowing capacities on the same income and deposit. The outcome will depend on lender criteria, expenses, liabilities and credit history.

Illustrative scenarios
Example 1
A couple in a coastal city with a combined income of around $175,000 and higher day to day spending may choose to review their expenses and prepare their application carefully before applying.

Example 2
Another family in a satellite town may find that keeping clear records of their income and commitments helps them present a more complete picture to lenders.

These examples are for illustration only. Actual assessment outcomes vary.

Beyond HEM
HEM is only one part of the serviceability picture. Lenders may also consider:

  • rental verification
  • future rate stress tests
  • LMI thresholds
  • deposit size
  • cross collateral arrangements

Offset and redraw accounts generally become more relevant after settlement. Pre-approval may not fully reflect them, so it can still be helpful to focus on clean statements and accurate income proof.

Regulatory context
Lender serviceability standards are designed to help support consistent assessment practices. Your spending over the next few months may influence how a lender reviews your financial position.

Lenders generally look for clear, accurate and consistent information when assessing an application.

How we can help
If you’re thinking about applying for finance in the future, it can be helpful to speak with our finance team well before you plan to apply.

We can:

  • review your general spending patterns and financial situation
  • explain how HEM and serviceability assessments typically work
  • suggest general ways to prepare your application within your own circumstances
  • compare multiple lenders’ approaches on your behalf

If you’d like to discuss how your current spending and financial setup might align with typical lending criteria, reach out and we can walk through general examples based on lender practices.