Ditch Christmas presents, gift lower home-loan repayments instead

Let’s make the collective call to skip Christmas – and see interest rates fall.

The holiday spirit is strong in my household but, like most Aussies, thanks to the cost-of-living crisis, our budgetary buffer is not.

The reality is that if we all collectively go big on spending money this Christmas, the real cost could be cruel. Instead, I propose we use my strategy to enjoy good financial health and ward off another hike to our home loan repayments.

Compilation image of houses to represent home loan, pile of Christmas presents and an arrow each way with a coin on top
Home loan repayments could storm higher again if Christmas spending pushes inflation higher. (Source: Yahoo Finance AU) (Samantha Menzies)

The festive frenzy could hike our home loan rates higher

As no home-loan holder has missed, the Reserve Bank (RBA) is trying to curb inflation with its interest rate rises - 13 of them so far. The latest Melbourne Cup Day punishment for those repaying a mortgage came after a four-month pause. Now, there's talk that a 14th rise is coming as soon as next month.

This is because inflation is not falling fast enough. Although it peaked at over 7 per cent last year, the quarterly number still stands at 5.4 per cent, largely thanks to high rents and petrol prices. We can’t do anything to influence the price of petrol, beyond buying where it is cheapest. And while you could choose to change your holiday plans to clock up fewer kilometres, you also may not want to.

We are, however, shutting our wallets and spending less on the fun stuff in the hope that the RBA might cut us some interest slack. In October, we curbed costs on recreation and hospitality by 4.7 per cent, and food and beverages by 1.3 per cent, according to the CommBank Household Spending Insights Index. Meanwhile, discretionary spending was also down 3.7 per cent.

headshot of Nicole in front of a Christmas tree
Nicole suggests we boycott Christmas presents this year in favour of lower home-loan repayments. (Source: supplied)

But resurgent retail sales, driven by the usual festive-buying frenzy, could put more rate rises on the agenda and/or keep them up high for longer. And it’s high-danger time, with the biggest shopping event of the year, Black Friday, just around the corner. Finder research shows almost one in three Aussies – equivalent to 6 million people – plan to take part.

Read more from Nicole Pedersen-McKinnon:

Overall, Aussies are expected to spend, on average, 10.69 per cent more to a total $1,863.86 on Christmas this year, according to the Cost of Christmas study from World Remit. For a benchmark, the average household is forecast to outlay $446 on Christmas decorations, $596 on food and $822 on gifts.

My first comment is: Does anyone really need new decorations? If you have kids, get them doing (free) Christmas craft. But my audacious, rate-rescuing idea is…

Skip presents and give the gift of lower home-loan repayments instead

With times tight for nearly everyone in the country, why not suggest to your Christmas crew that you still gather for that collaborative and cost-shared festive feast but forego the presents. Let me clarify: forego the presents for the adults. It’s only right to still go for presents for the kids.

You could pose the ‘gift skip’ as thus: “Let’s just all get together, eat food, and enjoy each other’s company – as in, our presents are our presence.”

Naturally, this has to be a group decision; I don’t want to be responsible for fracturing families. And you’d need to raise it immediately before the organised types have them wrapped under the tree. If not opening gifts is just untenable to your loved ones, though, there are some clever ways to get your Christmas-present cost way down, while trying to prevent interest rates from increasing further. Check out my next column for how I usually slash my gift spend.

But how about we make this Christmas a double celebration of savings? Save instantly on the spend and potentially lower our loan repayments in the coming months because of it.

Call me Scrooge but, this year, the financial gifts from skipping real ones could be enormous.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at Follow Nicole on Facebook, Twitter and Instagram.

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