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ANZ updates living expense requirements

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Reporter 6 minute read

The major bank has announced several changes to the way it assesses living expenses for mortgage applications.

ANZ will make several changes to its existing minimum living expense values to reflect an update to the Household Expenditure Measure (HEM) table released by the Melbourne Institute.

Effective from Monday, 6 May, ANZ will use customers’ gross annual income for the purposes of HEM look up.

The bank stated that it has taken a proxy for rental expenses, reducing the total gross value by 5 per cent when assessing customers’ HEM figure.


To determine serviceability, ANZ added that it would continue to use the higher of the customer’s stated expenses, or the new applicable minimum living expense.

ANZ added that for new applications that are submitted on or after 6 May, the updated expense parameters will be applied, while applications lodged prior to the effective date will be assessed under the previous expense parameters.

However, reassessments made on or after the effective date can be assessed under the previous expense parameters if there has been no increase in the amount of lending requested or any other credit critical changes from the original credit assessment.

The new expense parameters are to apply to applications that have been declined or have expired if any subsequent applications are made by the same customer.

“These changes are being made to ensure that ANZ is continuing to reflect the financial position of its customers accurately when making an assessment of whether or not an offer of credit is unsuitable for a customer,” ANZ stated.


Use of the HEM benchmark to assess mortgage serviceability was brought into question by the banking royal commission.

In his interim report, commissioner Kenneth Hayne alleged that using HEM as the default measure of household expenditure “does not constitute any verification of a borrower’s expenditure”, adding that “much more often than not, it will mask the fact that no sufficient inquiry has been made about the borrower’s financial position”.

In the final round of the royal commission’s hearings, ANZ was scrutinised over its use of the benchmark.

Counsel assisting the commission Rowena Orr QC pointed to a review of ANZ’s HEM use by consultancy firm KPMG upon the Australian Prudential Regulation Authority’s (APRA) request.

The KPMG review found that 73 per cent of ANZ’s loan assessments defaulted to the HEM benchmark.  

ANZ CEO Shayne Elliott noted that since the review, ANZ has taken steps to reduce its reliance on HEM, with the CEO stating that the bank plans to reduce the use of HEM for loan assessments to a third of its overall applications.

[Related: ANZ CEO weighs in on the HEM debate]

ANZ updates living expense requirements
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