Christmas is a time for joy, giving, and family, but it can also come with financial pressures. The festive season often tempts us to spend beyond our means, leaving us with debt that lingers well into the new year.

If you’re planning to buy a house or remortgage in 2025, your financial decisions this holiday season could significantly impact your chances. Lenders look closely at your financial habits, and excessive Christmas spending might send the wrong message.

In this article, we’ll explore how to enjoy the holidays responsibly while keeping your 2025 homeownership goals firmly on track. After all, the best gift you can give yourself is financial security and the ability to achieve your dream of owning a home.

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The Impact of Christmas Spending on Finances

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Christmas spending can be a joyful experience, but it’s also one of the most common times for financial missteps. Whether it’s splurging on gifts, festive outings, or the allure of Buy Now Pay Later schemes, overspending can lead to financial consequences that extend far beyond the New Year.

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The Consequences of Overspending

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Many people rely on credit cards or short-term loans to fund Christmas celebrations. While this might feel manageable in the moment, it can result in mounting debt that’s difficult to clear. By the time January rolls around, you may find yourself juggling repayments, which can harm your ability to save or maintain financial stability.

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How It Affects Mortgage Applications

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If you’re planning to buy a house or remortgage in 2025, these financial habits can directly influence your chances:

• Debt-to-Income Ratio: Lenders assess how much of your income is tied up in debt repayments. Holiday overspending can skew this ratio, making you appear less financially stable.

• Credit Score Impact: Missed payments or high credit card balances can reduce your credit score, which is a critical factor in securing favourable mortgage terms.

***Pro Tip***: Stay on top of your credit score by checking it regularly. It’s a great way to monitor any changes and spot potential issues early. 

• Savings Erosion: Money spent impulsively at Christmas is money that could have gone towards your deposit, fees, or emergency fund.

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A Relatable Insight

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In 2023, the average UK household spent over £740 on Christmas celebrations. While this might seem like a reasonable amount, unexpected costs or reliance on credit can quickly double the figure. Staying mindful of how these expenses fit into your broader financial goals is key to avoiding a holiday hangover that lasts all year.

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How to Celebrate Christmas on a Budget

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Christmas doesn’t have to mean overspending. With some smart planning and creativity, you can enjoy a memorable festive season without putting your finances—or your 2025 mortgage plans—at risk.

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1. Plan Your Spending

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• Set a Budget: Decide how much you can afford to spend overall and break it down into categories like gifts, food, and decorations.

• Stick to It: Use budgeting tools or apps to track your expenses and ensure you don’t go over your limit.

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2. Shop Smart

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• Start Early: Avoid last-minute shopping, when you’re more likely to overspend due to pressure.

• Look for Discounts: Take advantage of sales, cashback offers, and loyalty points. Many retailers offer significant discounts in the weeks leading up to Christmas.

• Compare Prices: Use comparison websites or apps to find the best deals on big-ticket items.

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3. Consider Thoughtful Alternatives

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• DIY Gifts: Homemade presents like baked goods, crafts, or personalised photo albums are meaningful and budget-friendly.

• Gift Experiences: Offer low-cost or no-cost experiences, such as babysitting, a home-cooked meal, or a nature outing.

• Secret Santa: Suggest this approach for family or friends to limit the number of gifts you need to buy.

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4. Limit Non-Essential Costs

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• Festive Outings: Dining out is a luxury that can quickly add up, especially over Christmas. Restaurants often raise their prices for festive menus, making a meal out significantly more expensive than usual. Instead, consider hosting a cosy dinner at home with friends or family. Potluck-style gatherings, where everyone brings a dish, can save money while adding a personal touch to the celebration.

• Decorations: Reuse items from previous years or try simple DIY decorations to save money.

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By planning ahead and being mindful of your spending, you can focus on the true spirit of Christmas—connection, generosity, and gratitude—without adding unnecessary financial stress.

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Avoiding Debt Over the Holidays

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Christmas can be a time of financial temptation, but staying disciplined can save you from starting 2025 in the red. Here are some practical strategies to help you enjoy the holidays without falling into debt traps:

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1. Prioritise Cash Over Credit

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• Use Cash or Debit Cards: Stick to using money you already have. This limits the risk of overspending compared to credit cards, which can create the illusion of affordability.

• Withdraw Your Budget: Consider withdrawing your Christmas budget in cash. Physically seeing the money decrease can help you stay on track.

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2. Monitor Your Spending

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• Keep Track: Use budgeting apps or a simple notebook to record every purchase. Knowing how much you’ve spent in real-time can prevent overindulgence.

• Set Spending Alerts: Many banking apps allow you to set notifications when you’re close to your limit.

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3. Beware of Buy Now Pay Later Schemes

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• Understand the Risks: These schemes may seem convenient, but missed payments can lead to additional fees and impact your credit score.

• Stick to Essentials: If you do use Buy Now Pay Later, ensure it’s for necessary purchases that fit within your budget.

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4. Avoid Impulse Purchases

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• Wait Before Buying: If you see something tempting, give yourself 24 hours to decide. Often, the urge will pass.

• Shop With a List: Going shopping with a clear plan can help you resist unnecessary splurges.

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5. Create a Debt-Free Christmas Plan

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• Save Early: Set aside a small amount each month for Christmas throughout the year. Even starting now can make a difference for next year.

• Limit the Number of Gifts: Agree with friends or family to exchange fewer gifts or focus on meaningful, low-cost options.

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By keeping debt in check during the festive season, you’ll not only avoid financial stress in January but also protect your credit profile and savings—a crucial step if you’re planning to buy a home or remortgage in 2025.

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New Year Resolutions for Mortgage Seekers

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As you turn the page to 2025, it’s the perfect time to set financial resolutions that bring you closer to your homeownership or remortgaging goals. Here are some practical steps to ensure your finances are mortgage-ready in the new year.

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1. Start Saving for a Deposit or Fees

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• Build Your Deposit: Regularly set aside a portion of your income for your house deposit. If you’re remortgaging, having savings can help with unexpected costs.

***Pro Tip***: Did you know that if you’re a first-time buyer, you may be eligible for a Lifetime ISA? With this account, the government will add a 25% bonus to your savings, up to £1,000 each financial year! It’s a great way to boost your deposit savings. If you’d like to learn more, click here and read our article on Lifetime ISA.

• Save for Additional Fees: Don’t forget about solicitor fees, valuation costs, and potential stamp duty.

***Pro Tip***: For those living in England, be aware of upcoming changes to Stamp Duty Land Tax (SDLT) thresholds:

• For Home Movers and Previous Owners: Currently, you won’t pay stamp duty on purchases up to £250,000, but from 1 April 2025, this threshold will fall to £125,000.

• For First-Time Buyers: At present, there is no stamp duty on purchases up to £425,000, but this threshold will drop to £300,000 from 1 April 2025.

Planning your property purchase before these changes could save you thousands. For full details, visit the official SDLT rates guide.

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2. Tidy Up Your Credit Report

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• Clear Small Debts: Pay off any lingering balances on credit cards or loans to improve your debt-to-income ratio.

• Check for Errors: Review your credit report for mistakes or outdated information that could harm your score. 

• Pay Bills On Time: Late or missed payments can significantly damage your credit score.

***Pro Tip***: Depending on your circumstances, you may be considering options such as debt consolidation or write-offs. While we can’t provide advice on debt management, it’s essential to be aware that solutions like Individual Voluntary Arrangements (IVAs), debt management plans, or bankruptcies can severely impact your future mortgage prospects. For example, an IVA alone may prevent you from applying for a mortgage for several years. Such options should not be taken lightly, and seeking expert advice is crucial before proceeding.

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3. Avoid Unnecessary Borrowing

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• No Big Loans: Avoid taking out new loans or credit cards unless absolutely necessary, as lenders will question recent borrowing.

• Keep Credit Usage Low: Aim to use less than 30% of your available credit to show responsible financial behaviour.

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4. Maintain Financial Stability

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• Stick to Your Job: Lenders favour steady employment, so avoid making career changes just before applying for a mortgage.

• Build a Financial Buffer: An emergency savings fund of three to six months’ expenses can demonstrate stability to lenders and will be your safety net during difficult times.

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5. Seek Expert Advice

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• Talk to a Mortgage Advisor: Getting personalised advice can help you understand your affordability and plan for a successful application.

• Stay Updated on the Market: Keep an eye on changes to mortgage products or interest rates that could affect your plans.

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New Year’s resolutions aren’t just about self-improvement—they’re about financial growth too. By sticking to these steps, you’ll be in a strong position to achieve your mortgage goals in 2025.

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Tips to Protect Your Mortgage Eligibility

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As you navigate through the festive season and into 2025, it’s important to prioritise financial habits that demonstrate stability to lenders. These tips can help you maintain or improve your mortgage eligibility:

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1. Avoid Maxing Out Credit Limits

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• Lenders assess your credit utilisation ratio—the amount of credit you’re using compared to your available limit. Keeping this below 30% shows you’re managing credit responsibly.

• Resist the temptation to rely heavily on credit cards for Christmas spending, as high utilisation can lower your credit score.

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2. Hold Off on New Loans or Credit Applications

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• Applying for new credit or loans shortly before seeking a mortgage can raise red flags with lenders. Each application results in a hard search on your credit file, which can temporarily lower your score.

• Focus on clearing existing balances rather than taking on new debt.

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3. Maintain Employment Stability

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• Lenders prefer applicants with steady income and employment history. Avoid making significant career changes during the months leading up to your application unless absolutely necessary.

• If you’re self-employed, ensure your financial records and accounts are up-to-date and ready for review.

***Pro Tip***: Don’t forget that the tax declaration deadline for the 2023/2024 financial year is 31 January 2025. Submitting your tax return on time is crucial, as lenders often require the most recent tax records to verify your income.

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4. Build a Savings Buffer

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• In addition to your deposit, having an emergency fund demonstrates financial stability. Lenders may view applicants with savings as lower-risk borrowers.

• Aim for three to six months’ worth of essential expenses as a safety net.

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5. Stay On Top of Financial Obligations

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• Pay all bills on time and in full to avoid late payment markers on your credit report.

• Keep a close eye on your credit score and address any discrepancies promptly. Regular monitoring can help you spot and correct issues early.

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6. Avoid Large Unusual Transactions

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• Lenders scrutinise your bank statements for unusual or large transactions. These could indicate financial instability or raise questions about the source of funds.

• Ensure all transfers and deposits are traceable and legitimate, especially for your deposit funds.

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7. Speak to a Smartlend Advisor

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• Our advisors can assess your circumstances and provide tailored advice to help you reach your mortgage goals faster and with less stress.

• We take care of the documentation, deal with lenders and solicitors, negotiate with sellers, and stay with you until completion. Let us handle the complexities so you can focus on finding your dream home or securing the best remortgage deal.

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Conclusion

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The festive season is a time to create memories, but it doesn’t have to derail your financial goals. By staying disciplined with your spending and focusing on long-term financial health, you’ll enter 2025 ready to achieve your homeownership or remortgaging plans.

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If you have questions or need personalised advice on preparing for a mortgage, don’t hesitate to reach out. We’re here to help you make your homeownership dreams a reality!

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Your home may be repossessed if you do not keep up repayments on your mortgage.

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