Perth, March 16: Australians looking to buy a home may find their borrowing power reduced as rising petrol prices begin to affect how lenders assess household expenses.
Julian Finch, founder and CEO of Finch Financial, said higher fuel costs driven by global tensions and conflict are becoming more relevant in mortgage applications, with banks factoring increased transport spending into overall living expenses.
“Fuel prices might seem like a small weekly expense, but when petrol rises sharply it can significantly affect how banks assess your financial position,” Finch said.
“When lenders calculate borrowing capacity, they look closely at your ongoing living costs. If petrol prices spike and you’re spending more on fuel every week, it reduces the income available to service a home loan.”
Finch said households that rely heavily on driving, particularly for work, school runs and daily errands, may feel the pressure the most. He said higher fuel costs could add hundreds of dollars a month to living expenses, making it harder for borrowers to meet lender serviceability requirements.
“When geopolitical events disrupt oil supply, the impact flows directly through to petrol prices,” he said.
“For households that rely heavily on driving for work, school or daily life, those higher costs can add hundreds of dollars a month to their expenses.
“Tradies driving around in big utes that cost a lot to fill are going to be hardest hit.”
Banks assess home loan applications using serviceability calculations that take into account both declared and observed living expenses. Finch said fuel spending showing up consistently in bank statements can influence how lenders calculate affordability, alongside benchmark figures such as Household Expenditure Measurement (HEM).
“Lenders don’t just look at income and deposits,” Finch said.
“They analyse spending patterns and fuel is one of those expenses that can quickly increase when global events push up oil prices. Banks use a baseline figure called HEM (Household Expenditure Measurement) which is adjusted periodically. High inflation and an extended increase in fuel costs will absolutely impact this figure.”
Borrowers in outer suburbs and regional areas may be particularly vulnerable, especially those commuting long distances or running multiple vehicles.
“People who commute long distances for work often spend far more on petrol than they realise,” he said.
“When fuel prices jump, those costs can materially affect their borrowing capacity.”
Finch said even modest savings on recurring expenses could help improve a borrower’s position ahead of applying for finance, including cutting back on unnecessary trips or using public transport when possible.
“It’s not about eliminating petrol spending altogether,” Finch said.
“Lenders are assessing your real financial behaviour, so even small reductions in regular expenses can help improve your borrowing profile.”
He said the situation shows how international events can have a direct impact on Australian households, not only through the cost of living but also through access to finance.
“Most people don’t think about global conflicts affecting their home loan,” he said.
“However, when those events push up fuel prices, they can quietly influence household budgets and borrowing power.”
Finch urged Australians to review all recurring expenses carefully as interest rates remain high and lenders continue to apply strict serviceability tests.
“Rates are now almost certain to increase even higher than they were 12 months ago and likely more than two additional increases after the first one back in February this year,” he added.
“Inflation has been hovering around 3.4-3.8 percent depending on headline vs underlying figures but is now more than likely to have a four in front of it and that is before the full toll of the middle east war has been included.”
“With interest rates still elevated and likely to keep climbing and lenders maintaining strict serviceability tests, Australians planning to enter the property market should consider all aspects of their spending.
“Every dollar of recurring expense counts when a bank is assessing your ability to repay a loan,” he said.
“Right now, petrol is one cost that could be rising faster than people expect.”
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