There is a number in your loan assessment you will never be shown, and it is not your income.
Every lender has to form a view on what your household spends to live. You are asked to declare it. Behind the scenes, that figure is compared against a benchmark called the Household Expenditure Measure, built by the Melbourne Institute from Bureau of Statistics survey data and adjusted for inflation.
It varies by household size, whether you have children, and the income band you sit in. The lender then takes the higher of the two figures, yours or the benchmark.
That last detail is the one people miss.
Declaring a low number does not lift your borrowing capacity, because the benchmark sits underneath you as a floor. What it can do is create a problem. If your declared figure sits well below what your bank statements show, an assessor has to reconcile the difference, which either slows the file down or invites questions the application did not need.
The reverse happens just as often. Applicants total the last three months, holiday and new washing machine included, then present that as ongoing spending. Now they are assessed on costs they will never repeat.
Here is what actually shifts the number. Living expenses are only one part of the calculation. Credit card limits are counted at the limit, not the balance. Car finance, buy now pay later arrangements and study debt are assessed separately, on top of the benchmark. Closing a card, you stopped using two years ago can move your capacity further than trimming the grocery budget ever will.
Accuracy is the goal, not a low score. The benchmark is not a test to beat.
If you are preparing to apply, it is worth understanding how your position reads from the other side of the desk before the application goes in.
My Mortgage Concierge is licensed under ACL 392736 Sattout Accounting Services Pty Ltd. General information only — seek personal advice before acting.
