PHOTO: Household Expenditure Measure, Melbourne Institute – University of Melbourne
For more than a decade, one magic number has made the difference between nabbing your dream home — or being rejected for a loan.
That number is the Household Expenditure Measure (HEM), a tool that has long been used by most of our banks to calculate our expenses and ability to manage repayments, which then helps determine how much we can borrow.
But it’s also hugely controversial, as there’s often a discrepancy between a person’s estimated and actual expenses.
Since the banking royal commission has been underway, banks have started to reduce their reliance on the HEM amid fears Commissioner Kenneth Hayne would call for it to be banned altogether.
But that hasn’t happened.
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