Banks' assessments of household spending and liabilities to income are a major issue in determining whether to grant a loan.

They primarily rely on the Household Expenditure Measure – or HEM – as a benchmark, which is calculated on family size, location and lifestyle and is the same method used by the Australian Bureau of Statistics.

The bank's analysis is based on a statistically representative sample more than 3400 applications for loans with Tic:Toc.

The numbers have been corroborated by banking data provided to the royal commission.

Average monthly expenditure greater than the benchmark HEM ranged from $827 in Tasmania to $1634 in NSW. The proportion over HEM was upwards of 73 per cent in the Northern Territory, 58 per cent in NSW and about half in Victoria.

Westpac, the nation's second-largest lender, and ASIC are currently in the Federal Court over the bank's alleged failure to properly assess whether borrowers could meet their repayments before signing them up for mortgages.

It is possible that many Westpac loans were approved to customers who would have been found to be have unable to meet the repayments had their individual circumstances been examined.

The court has rejected the joint application for a penalty of $35 million and asked for the parties to redraft the settlement and return to court by November 27.


Lawyers are reassessing what the law requires and what Westpac did.

The royal commission is also considering the use of general benchmarks – rather than individual case-by-case analysis – to determine the ability of borrowers to repay.

Major lenders have recently attempted to improve the HEM with deep-dive analysis of applicants' income and expenditure. Financial details submitted to verify the application are being independently assessed by credit companies.

Mortgage brokers claim the tougher lending regime has slowed loan approvals.

About half of new residential mortgage applications are being rejected and nearly 90 per cent of borrowers with loan pre-approvals (a lender's estimate of a possible loan based on the applicant's financial position) are having the amount reduced when the loan is finalised, they claim.

Tic:Toc uses Yodlee, proprietary technology gatekeeper that digitally validates borrowing power, credit checks, personal ID and all other financials.

Bendigo Bank Express, whose parent Bendigo Bank is a major shareholder of Tic:Toc, is switching to the same online verification systems for its instant home loans.