Borrowers have to curb their urge to splurge in the festive season and not start 2009 with a financial hangover, a leading mortgage company says.
Resi Mortgage Corporation head of consumer advocacy Lisa Montgomery said borrowers should tighten their spending and not depend on any future rate cuts to ease them through the Christmas period.
"The last round of interest rate cuts passed on by most lenders have been quickly absorbed by many credit-stressed borrowers," Ms Montgomery said.
"There are no guarantees that any future rate cuts handed down by the RBA before the end of the year will be fully passed on by lenders."
This week, ANZ chief executive Mike Smith could not ensure his bank would keep passing on future rate cuts by the Reserve Bank of Australia (RBA) due to higher funding costs from the global credit crunch.
"I have to fund the book and am running a business. So we'll have to wait and see," Mr Smith said.
The RBA lowered the official cash rate by a quarter of a percentage point to seven per cent on September 2 to help stimulate the flagging economy.
It was the first RBA rate cut since December 2001.
Financial markets are pricing another quarter of a percentage point cut at each of the next three monthly board meetings of the RBA.
In the festive season borrowers should restrain their discretionary spending, Ms Montgomery said.
"(It is) an area of spending which traditionally tends to blow out over the last few months of the year and invariably leads to a New Year hangover."
Credit card debt generally rises due to increased discretionary spending, but cardholders have started to whittle down their love of plastic.
Debt on credit cards grew at its slowest annual pace in 14 years during July, the latest RBA data revealed.
Ms Montgomery said that data indicated borrowers were controlling their spending.
"Whether by choice or necessity, but regardless, it's important for everyone to continue this pattern," she said.
Parts of spending that can be controlled comfortably in the last quarter of the year are entertainment, gifts and holidays, Ms Montgomery said.
This year would be a tough one for many Australians, she said.
"But with several months to go, there is still opportunity to maintain some control."
