Millions of Aussies set to go into debt over Christmas spending

People are increasingly relying on credit to fund their holiday spending, in a further sign of household budgets stretching under the cost of living burden.

A national survey by Finder revealed 24 per cent of people will be relying on credit to cover costs over the Christmas season - equivalent to 4.8 million people who will be pushed into debt by festive spending.

Nine per cent of respondents said they would turn to buy-now, pay-later services during the holidays, while 13 per cent would depend on their credit card.

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The majority of respondents - 53 per cent - will rely on their savings.

Three quarters of experts surveyed by Finder said Australians were more likely to turn to credit cards and buy-now, pay-later services to fund the festive season compared to 2021.

However, most also said Christmas spending would be lower overall.

Finder money expert Rebecca Pike said cost-of-living increases had pushed Australians to dive into their savings or think of going beyond their means this silly season.

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"It's been a hard year for many, so coming up short for cash is nothing to be embarrassed about," she said

"Whilst it might seem like a good idea at the time, using credit as a means of funding the holiday season if you don't have the cash readily available, could come back to bite you."

With the cost-of-living skyrocketing, Finder research also revealed almost three quarters (72 per cent) of Australians are taking some action to save money in the lead up to Christmas – equivalent to 14.4 million who are feeling the pinch.

More than one in 10 (11 per cent) have taken on a second job or side hustle to cover the cost.

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Pike said the holiday season is short-lived but debt can take ages to pay off.

"Avoid blowing your budget by setting up a credit limit you'll be able to pay off," she said.

"If you find yourself struggling to pay off debt in the new year, speak to your bank or provider to see what support is available."

Christmas debt boom as households await 'mortgage cliff'

The move to households to put Christmas spending on credit cards comes as thousands of households await a fixed-rate mortgage cliff early next year.

Analysis from RateCity shows that from Australia's two biggest banks - Commonwealth Bank and Westpac - a staggering $99 billion worth of mortgages are coming off a fixed rate in the second half of 2023.

Multiple subsequent cash rate hikes from the Reserve Bank of Australia (RBA) over the course of that fixed-rate period means many borrowers will suddenly be facing a jump in repayments by up to 65 per cent.

"People on a fixed rate shouldn't put their heads in the sand, but instead take action while they can," RateCity.com.au research director Sally Tindall said.

"Instead of dreading the day your fixed rate ends, consider testing out your budget now by making these higher repayments while your rate is still low.

"Not only will this give you comfort in the knowledge you can tackle the cliff head-on, you'll also build up a buffer in your loan for emergencies."

Co-founder of BuyersBuyers Pete Wargent said the sudden jump in repayments will put the brakes on the amount of goods and services the average Aussie household consumes.

"The fixed rate mortgage cliff has been talked about as a potential issue for some time, but only now is it about to become a significant problem for the Australian economy," Wargent said.

"There are plenty of moving parts, but it's not hard to see that such a huge switch is going to create some major tremors for existing borrowers, which will in turn have significant implications for household consumption going forward."