Christmas is a time for celebration, connection, and a well-earned break, but it also happens to be one of the most expensive times of the year. Between gift-buying, travelling and hosting, December can bring a series of small but significant expenses that quickly add up.
If you are considering applying for a mortgage in the new year, understanding how festive spending fits into your wider financial picture can be helpful and ensure you keep on track of your homeownership goals.
In this article, we break down the 10 most common costs of Christmas and how you can stay mortgage-ready without compromising on the joy of the season.
What are the most common Christmas costs and how could they impact your budget?
While Christmas is an exciting time of year, it can feel financially demanding, particularly for first-time buyers or those preparing to move home. Below are the most common festive expenses lenders are used to seeing on bank statements during December.
- Gifts for family and friends
Gift budgets can vary widely, but even thoughtful, modest gifts can add up. This leads to many households having higher-than-normal outgoings in December.
According to Finder’s Christmas statistic report, average Christmas gift spending is estimated to be around £514 per person.
- Food for the big day
Seasonal food prices, large food shops and festive treats usually result in increased food spending throughout December.
MoneySuperMarket states that the average UK household spends around £190 on Christmas food, however depending on how many guests you are accommodating for this figure may differ.
- Festive drinks
From Bailey’s to mulled wine or champagne for toasting, festive drinks can take up a large share of December spending, especially if you are hosting large or multiple gatherings.
A survey conducted by YouGov found that around 31% of British adults budget between £100 to £199 for food and drinks for Christmas, with a further 20% expecting to spend between £200 to £300.
- Decorations
Christmas trees, decorations, wrapping paper, and lighting are small individual purchases that can collectively have a noticeable impact on monthly spending.
Tesco have stated that the average price of a Christmas tree from a garden centre or roadside seller is around £50 to £60. However, you may find more affordable options at popular supermarkets such as Aldi and Lidl who are offering Christmas trees for around £20.
- Travelling throughout December
Whether you travel by train, car, or plane, holiday travel isn’t cheap. These costs can represent one of December’s biggest expenses.
Travelling doesn’t just include the commuting to see loved ones on Christmas day, it also includes travelling to your local shopping centre for Christmas presents, a festive getaway or visiting a Christmas market to get in the festive spirit.
A YouGov survey found that people commuting over the holidays expect to spend around £50 on travel, with some stating they spend even more.
- Hosting guests
The general cost of accommodating visitors is often overlooked when budgeting for Christmas. While hosting brings joy, the cost of fresh bedding, snacks, extra meals, and drinks can all add up.
These costs will depend on how many guests you are accommodating and how long for but expect energy and water bills to rise slightly as well as the extra items that may need purchasing.
- Winter energy bills
Shorter days and colder weather naturally lead to increased heating and electricity usage, leading to noticeably higher bills throughout December.
The National Grid have found that in the first week of December, electricity usage typically rises by an average of 7.3%, meaning many peoples energy bills are likely to be higher throughout the holidays.
- Seasonal clothing
Whether it’s warm shoes, winter coats, or something sparkly for the work Christmas party, updating your wardrobe is common for many people during the winter months.
Although these purchases are typically optional, the price of shoes and clothing can quickly add up, becoming a larger expense than expected. Budgeting for these purchases in the months leading up to Christmas may help cover the costs of these exciting items and ensure you don’t dip into your Christmas budget.
- Last-minute emergencies
December has a way of producing small surprises that can impact monthly budgets, such as missing gifts, a forgotten ingredient, or an extra stocking filler for someone special. However, these costs can push spending beyond planned limits.
Setting aside an emergency cash fund at the beginning of the month will help ensure these unexpected costs are covered, without the need for dipping into your savings even further. Additionally, writing lists and keeping track of what/who you have bought for, will help prevent you from forgetting the little things.
- New Year celebrations
Just when the Christmas rush ends, the New Year arrives, usually meaning the seasonal spending extends beyond Christmas day, often affecting January finances.
Hosting a party can be great fun but asking each guest to bring a drink or food item can be a great way to help spread the cost of your New Years celebrations.
Does Christmas spending affect mortgage affordability checks?
Mortgage lenders are aware that December can bring additional costs compared to the rest of the year, with extra spending being expected.
As part of the mortgage application, lenders carry out affordability checks to assess whether your mortgage repayments are realistic and sustainable over the long term. However, rather than focusing on one busy month, lenders will assess your overall financial picture.
These assessments involve a credit check, stress test, and a general assessment of your overall finances to determine the risk associated with your loan, including:
- Your regular income and how consistent it is.
- Your monthly outgoing’s, such as bills, subscriptions, childcare, travel, and existing credit commitments.
- Your recent bank statements (typically covering the last few months).
- Your day-to-day expenditures to understand how much flexibility is in your budget.
Can Christmas spending impact your credit score before applying for a mortgage?
As part of the process, lenders carry out a credit check to understand how you have managed borrowing in the past. They will mainly look at:
- Whether your bills are being paid on time.
- How much credit you already have access to.
- How regularly you use credit cards and overdrafts.
- Whether any outstanding credit balances are reducing over time.
Using a credit card is common over the holidays to help spread the cost of large purchases. However, ensuring balances remain affordable and payments are made on time is essential to ensure your overall financial picture is not impacted by the holidays.
Additionally, covering Christmas bills by taking out short-term debts, such as pay-day loans (short-term unsecured loan) could negatively impact your credit score, which is something to consider if you are thinking of applying for a mortgage in the new year.
How to keep your Christmas spending mortgage-friendly
A little preparation can go a long way during the holidays, especially if your goal is to start the new year with a mortgage application in great shape and feel comfortable with your finances.
There are ways you can help maintain a strong financial picture over the holidays, including:
- Use savings where possible instead of relying on credit.
- Set yourself realistic and flexible budgets.
- Monitor your spending to ensure you stay in budget.
- Avoid large, unfamiliar transactions close to when you plan to apply.
- Book your travel early to avoid peak prices
- Suggest budget friendly ideas (e.g. secret Santa) with friends and family to help keep spending minimal.
Here at Cooper Associates Mortgages, our expert advisers take the time to get know you and understand your personal circumstances, focusing on providing you with bespoke advice that is tailored to your needs.
We can advise you on how stress testing affects your affordability, help you understand how to improve your credit profile, determine the best term to fit within your budget and can advise you on the best product for your circumstances.
Planning for the New Year: How to stay mortgage ready after the holidays
Christmas is a time for generosity and celebration, and thoughtful planning can help ensure the seasonal festivities do not conflict with your homeownership goals.
If you are planning to apply for a mortgage in the new year, whether as a first-time buyer or someone seeking to remortgage, our team of expert advisers can help you understand affordability and navigate the mortgage landscape with confidence.
Get in touch today to start the new year with clarity and a clear path towards your next home.
