Aussies brace for a lean Christmas amid mortgage strain

With no rate cuts expected before Christmas and the average Australian mortgage still sitting at $600,000 nationally and closer to $750,000 across Sydney and Melbourne, households are tightening their belts ahead of the festive season.

Australians are preparing for a financially restrained Christmas, with cost-of-living pressures and high mortgage repayments forcing many to rethink how they celebrate.

"Living costs continue to weigh heavily on household budgets, and it's changing the way Aussies are approaching Christmas this year," said Sophie Ryan, spokesperson for iSelect.

"Our recent research shows that 65 per cent of Aussies have cut back on expenses in the past three months to help cover end-of-year costs."

A leaner Christmas as mortgage pressure bites

The RBA's decision to hold the cash rate steady in November created a tough reality.

Borrowers aren't likely to see mortgage relief before the holidays.

But the central bank has left the door open to a future cut, saying it's "too early to rule out" easing monetary policy if economic conditions shift.

The minutes released yesterday from November's board meeting revealed two potential paths:

Rates could remain on hold if inflation stays higher for longer, household spending rebounds more than expected, or productivity growth weakens.

Rates could be cut if the labour market deteriorates further or if households tighten their spending more than forecast.

The RBA noted that "many indicators of the labour market had softened over the prior year," and warned that if households remain cautious, it "would likely be appropriate to ease monetary policy to keep inflation at target and the labour market around full employment."

But while a cut is possible, it won't come in time to help families facing festive-season costs in 2025.

And that reality is shaping Christmas plans nationwide.

"This financial pressure is shaping a very different festive season, as families are choosing smaller gatherings, simpler meals, and prioritising essentials over extravagance," Ryan said.

"We're seeing a real shift towards a 'leaner' Christmas, where meaningful moments and time with loved ones are taking precedence over lavish spending or big-ticket gifts."

Tips to avoid a post-Christmas debt hangover

Ryan says early planning is the best line of defence: "With budgets tighter than ever, smart planning is key. Start by setting a realistic budget for gifts, food and entertainment, and stick to it."

She recommends meal-planning, bulk-cooking and avoiding expensive last-minute shopping trips, all of which help keep grocery and entertaining costs under control.

Gift-giving, she adds, is another area where small changes can save big.

"Consider experiences or thoughtful, low-cost options that won't stretch your finances, such as a creative workshop or class or a voucher for a local outing."

Their research also shows one in four Australians won't participate in Black Friday or Cyber Monday sales this year, a sign households are actively avoiding impulse spending.

"Small, considered decisions now mean you can head into the new year financially healthy, without buyer's regret," Ryan said.

Australian families are also winding back on entertaining, with 60 per cent saying they're cutting back on festive dining out or hosting.

"Planning ahead isn't just about spreading out costs, it's about giving yourself more control," Ryan said.

"Rather than shouldering the full cost of big gatherings, many are opting for more relaxed, shared celebrations where everyone contributes a dish or brings their own drinks."

This shift, she says, reflects changing priorities.

"Aussies still want to connect and celebrate, but without the stress or expense that often comes with hosting during an already costly time of the year."