How Holiday Spending Can Impact Mortgage Approval

The holiday season is full of joy — and spending. But for Canadians planning to buy, refinance, or renew a mortgage, holiday spending can quietly hurt mortgage approval chances if not managed carefully. Lenders look closely at your financial behaviour leading up to an application, and December habits can influence decisions well into the new year.

Here’s how holiday spending affects mortgage approval — and how to protect yourself.

1. Credit Card Balances Can Lower Your Credit Score

Holiday shopping often leads to higher credit card balances. Even if you pay on time, high utilization can reduce your credit score.

Why this matters:

• Lenders prefer utilization below 30% of your credit limit

• Maxed or near-maxed cards signal higher risk

• A lower score can mean higher rates or outright decline

A drop of even 20–40 points can change which lenders approve you.

2. Higher Debt Hurts Your Debt-to-Income Ratios

Mortgage approval is heavily based on Gross Debt Service (GDS) and Total Debt Service (TDS) ratios.

Holiday debt increases:

• Monthly minimum payments

• Total liabilities

• TDS ratio — a key approval metric

Even small monthly payments from holiday purchases can push you over lender limits.

3. Buy-Now-Pay-Later Programs Still Count as Debt

Many buyers forget that:

• Afterpay

• Klarna

• Affirm

• PayBright

…are still considered liabilities.

Lenders see these as:

• Installment debt

• Monthly obligations

• A sign of short-term cash-flow strain

Multiple BNPL accounts can negatively affect approvals.

4. New Credit Applications Raise Red Flags

Opening new credit during the holidays — even store cards — can trigger:

• Credit inquiries

• Lower credit scores

• Lender concerns about borrowing behaviour

Mortgage underwriters prefer stable credit activity for at least 90 days before approval.

5. Large Purchases Can Affect Bank Statements

Lenders often review:

• 90 days of bank statements

• Down payment sources

• Spending consistency

Large unexplained purchases may prompt questions about:

• Financial discipline

• Available savings

• True affordability

This is especially important for first-time buyers.

6. Reduced Savings Can Impact Down Payment Strength

Holiday spending can drain:

• Emergency funds

• Closing cost reserves

• Down payment buffers

Lenders want to see:

• Funds left after closing

• Financial resilience

• Ability to handle unexpected costs

Low remaining savings can weaken an application.

7. Self-Employed Borrowers Face Extra Scrutiny

For self-employed buyers, holiday spending can:

• Lower average account balances

• Distort cash-flow analysis

• Raise questions during underwriting

Consistency is key — especially in the final quarter of the year.

8. How to Protect Your Mortgage Approval During the Holidays

✔ Keep credit utilization below 30%

✔ Avoid new credit applications

✔ Limit buy-now-pay-later plans

✔ Keep emergency and closing funds intact

✔ Pay balances down before applying

✔ Speak to a mortgage broker before major purchases

Even small adjustments can preserve your approval strength.

9. When Holiday Spending Won’t Hurt You

Holiday spending is less impactful if:

• Your credit score is already strong (720+)

• You maintain low utilization

• You have strong income and savings

• You’re months away from applying

Timing matters — spending closer to application dates has greater impact.

Final Thoughts

Holiday spending doesn’t mean you can’t enjoy the season — but it does mean being mindful if a mortgage is on your horizon. Credit utilization, debt ratios, and spending patterns all play a role in mortgage approval decisions.

A little planning now can mean better rates, smoother approvals, and fewer surprises in the new year.

If you’d like, I can turn this into a RateShop buyer checklist, holiday finance guide, or Instagram carousel.