Lenders can now pull your actual transaction data and let AI compare it with the living expenses you declare. For borrowers who once rounded down, the number that decides how much you can borrow just got much harder to game.
The days of nominating a tidy, optimistic living-expenses figure on a loan application are ending. Lenders are moving fast to plug open banking into their assessment engines. According to industry research reported by The Adviser, 88% of lenders intend to use open banking for income verification and 70% named expense verification as a key use case.
Instead of a self-declared number checked loosely against a benchmark, the lender can now read your real spending, categorised by AI, straight from your bank. Layer that on top of the Australian Prudential Regulation Authority's (APRA) unchanged 3% serviceability buffer, and the amount an applicant can borrow is being squeezed from two directions at once.
For buyers and investors counting on a certain borrowing capacity, the figure the model produces may no longer match the one they had in mind.
The core data and the shift underway
According to industry research reported by The Adviser, 88% of lenders are looking to use open banking for income verification, 73% see it as essential for fraud detection, and 70% flag expense verification as a priority.
The Consumer Data Right, Australia's open banking regime, is being extended to non-bank lenders through 2026, widening the net. The pull is efficiency as much as caution, giving lenders real-time income and expense categorisation instead of a static, self-reported figure.
What changes for the borrower is verification. Living expenses were historically assessed against the Household Expenditure Measure, or HEM, a benchmark that varies by household type and income and that sits higher in dollar terms in 2026 than in 2022. Open banking lets the lender test your declared figure against what you actually spend.
The structural and policy drivers
Two settings are doing the work. The first is APRA's serviceability buffer, held at 3 percentage points since October 2021 and left unchanged again in 2026, despite lender lobbying to trim it to 2.5 percentage points.
It forces lenders to test repayments at roughly 3 percentage points above the actual rate, so with variable rates near 6.5%, applicants are assessed at about 9.5%, cutting maximum borrowing by an estimated 15% to 20% before expenses are even counted. The second driver is the move from benchmark to evidence.
HEM has faced longstanding criticism for letting borrowers understate spending, and open banking closes that gap by replacing the honour system with transaction data. Add the Reserve Bank of Australia's (RBA) cash rate at 4.35% (as at May 2026) and a softening market, and lenders have every incentive to verify rather than assume, a shift we unpack in "The Fixed vs Variable Question Has Shifted".
Edward Abella
Practical implications for portfolio strategy
For anyone about to borrow, the shift is simple: your application will increasingly be judged on what you spend, not what you say you spend. Before applying, treat your recent transaction history, the period lenders typically review, as the real test.
Trim discretionary spending early, clear or consolidate buy-now-pay-later accounts and small debts an AI will flag, and make sure recurring costs are recorded for what they are. Investors should model borrowing capacity on verified expenses, not an optimistic budget, and remember the 3% buffer still applies on top of the repayment maths we set out in "How to Take Years Off Your Mortgage as Rates Climb".
Bruce Guan
If your genuine spending sits above HEM, expect a lower approval than a benchmark-only assessment would have offered. There is an upside: clean, well-categorised finances can speed up approval and strengthen a strong applicant's case. The discipline that counts is no longer the story you tell the lender. It is the record your bank already holds.
What to watch this quarter
The direction is set. As the Consumer Data Right reaches non-bank lenders through 2026, open-banking assessment moves from early-adopter edge to industry standard, and self-declared expenses lose whatever slack remained.
Watch three things: whether APRA revisits the 3% buffer as the market softens, how far lenders push AI expense categorisation into investor and self-employed applications, and whether faster, data-driven approvals widen access for clean borrowers or simply tighten it for everyone else. For now, the safest assumption is that the lender can already see your spending. Borrow accordingly.
