Weight Loss Drug Spending Could Slash Australian Borrowing Power by $100,000
Australians splashing cash on popular weight loss medications like Ozempic, Mounjaro and Wegovy could be unknowingly hindering their ability to secure a home loan. New research reveals that regular spending on these drugs may reduce borrowing capacity by as much as $100,000 in the eyes of lenders.
Significant Monthly Outlay Impacts Loan Assessments
Research from Money.com.au shows the average Australian using GLP-1 medications, including Ozempic, spends approximately $610 monthly. This substantial recurring expense is being factored into lending assessments, potentially classifying it alongside discretionary costs like private health insurance or school fees.
Mortgage expert Debbie Hays warns that lenders scrutinise bank statements for regular direct debits, questioning any substantial monthly payments. "When you submit your bank statement to a lender it is their obligation to go through them, and if they find a regular direct debit of $700 they will question what it is," Ms Hays explained.
Household Expenditure Measure Benchmark Crucial
The monthly spend on weight loss drugs may be incorporated into the Household Expenditure Measure (HEM) assessment, a benchmark Australian lenders use to determine minimum expected household spending. This measure often supplements or replaces borrower-reported expenses.
"It's a higher expense than private health cover for a single applicant so a lender can determine it reduces their borrowing capacity by $80,000 to $100,000," Ms Hays noted, highlighting the significant financial impact.
Generational Disparities in Medication Usage
Younger Australians face particular challenges, with 18% of Millennials spending up to $760 monthly on weight loss drugs. In contrast, only 8% of Generation X and 2% of Baby Boomers report using these medications for weight management.
Approximately 17% of Australians currently take GLP-1 medications, but only 7% use them to manage health conditions like diabetes, indicating substantial off-label weight loss usage.
Real-World Borrowing Capacity Impacts
For a child-free couple earning a combined $220,000 annually with an additional $610 monthly GLP-1 medication expense, borrowing capacity could decrease by $100,000 depending on the lender. Modelling shows their maximum borrowing capacity might plunge from $1.2 million to $1.1 million based on a 30-year owner-occupier loan with principal and interest repayments and a Loan to Value Ratio below 80%.
This $610 monthly outlay represents about 15% of the typical $4,180 monthly mortgage repayment, creating a substantial financial burden that lenders cannot ignore.
Unanticipated Financial Consequences
Ms Hays cautioned that hopeful homeowners using these drugs might face unexpected setbacks. "They don't even think about it and as a borrower you must think everything is against you with the current cost-of-living," she said, noting borrowers are "grappling with two different things."
The expert emphasised that weight loss goals and home ownership aspirations can conflict financially. "If someone is overweight and starts taking these drugs and they're also wanting to save for a home, it impacts their borrowing ability," she concluded, urging Australians to consider these hidden costs when planning major financial commitments.
