What is HEM?

And why Lender's use it as an estimated Benchmark

A plain-English guide to the industry benchmark lenders compare against your declared living expenses — and why our calculator shows it alongside your own numbers.

The Short Version

HEM stands for the Household Expenditure Measure — a standard, industry-wide estimate of how much a household typically spends on everyday living costs, based on income, location, and household size. Most Australian lenders use some version of it as a sense check when they assess how much you can borrow.

When you use our calculator, we call this figure your Estimated Lender Benchmark. That's a deliberate choice of wording: it's our own estimate of what a HEM-style benchmark would look like for a household like yours, not a number licensed from or endorsed by any specific bank.

Where HEM comes from

The HEM methodology was originally developed by the Melbourne Institute, using data from the Australian Bureau of Statistics' Household Expenditure Survey — a large, periodic survey of real household spending across Australia. The resulting figures are typically indexed for inflation between survey periods.

The exact benchmark tables individual banks use are usually licensed from a commercial data provider and built into each lender's own loan-serviceability systems — they aren't published in full for the public to look up. That's an important limitation to be upfront about: no calculator outside a bank's own systems, including this one, can reproduce a specific lender's exact number.

How lenders use HEM

When you apply for a home loan, you declare your living expenses. Most lenders then compare that figure with their own HEM-style benchmark for a household like yours, and — for serviceability purposes — generally use whichever number is higher. In other words, HEM typically acts as a floor, not a ceiling.

Why this matters: if your declared expenses come in below the benchmark, a lender may still assess your borrowing capacity using the higher benchmark figure — which can reduce how much you're able to borrow, even though your actual day-to-day spending is lower.

Its limitations

It's a minimum guide, not a precise personal figure. It reflects typical spending for a household profile like yours, not what you actually spend.
It doesn't cover everything. Costs like rent or mortgage repayments, health insurance and private school fees are usually assessed separately by lenders, not folded into the benchmark itself.
It varies between lenders. Each lender applies its own overlays and policies on top of a HEM-style figure, so borrowing capacity for the same household can genuinely differ from one lender to the next.
Other factors matter too. Your income, existing debts and other financial commitments all feed into a lender's final assessment alongside any expense benchmark.

Bottom line: treat the Estimated Lender Benchmark shown in our calculator as a useful guide for understanding how banks think about living expenses — not as a guarantee of what any specific lender will calculate, or of how much you'll be able to borrow.

Why we still show it to you

Seeing how your own declared expenses compare to a typical benchmark is a useful sanity check before you apply for finance — it can flag figures that look unusually high or low, and help you understand one of the ways lenders think about serviceability. It's one input among many, not the final word.

And however you use it: when you complete an actual credit application, always declare your true and accurate living expenses. It's an offence to knowingly understate them, regardless of what any benchmark shows.