HEM (Household Expenditure Measure)

The Household Expenditure Measure is a Melbourne Institute benchmark of minimum reasonable household living expenses, broken down by household size, location, and income band. Lenders are required to use the higher of your declared living expenses or the HEM figure when calculating serviceability - so even if you genuinely live cheaply, the bank may assume you'll spend the HEM amount instead. Couples with kids have higher HEM than singles; higher income earners have higher HEM than lower earners. Aggressive expense honesty rarely beats HEM because the benchmark is the floor, not the ceiling. The figure is reviewed quarterly and varies materially by capital city.