MORE cash-strapped south-west residents are struggling to pay their council rates and water bills - but it's not stopping them buying new cars.Easy access to credit combined with crippling housing costs are threatening to create a mass of ``working poor'', according to a community advocate.Warrnambool City Council, Moyne Shire and Wannon Water have revealed a growing number of people are battling to pay their bills.Warrnambool City Council chief executive officer Bruce Anson said the proportion of outstanding rates had jumped from 1.7 per cent to 2.8 per cent, or $540,000, in the last financial year.That amounts to about a 97 per cent collection rate this year, roughly on par with other councils across the state, he said.In neighbouring Moyne Shire five per cent more reminder notices to pay rates have been sent out this year than in 2007.With growing numbers of customers facing mounting debt, Wannon Water has launched an advertising campaign informing people of various payment assistance options. Marketing and communications manager Annette Cannon said the number of residential customers taking advantage of payment assistance plans had increased by more than 150 customers between last November and May this year, reaching a total of 1355 households. Ms Cannon was unsure if this was due to growing community hardship or greater awareness that help was on offer.Residents struggling to pay their council rates was a symptom of the south-west's housing crisis, Community Connections manager of community advocacy services Peter Sheen said. ``If you're putting 40 to 50 per cent of your income into the cost of a mortgage then something's got to suffer,'' he said.Residents who pay more than 25 per cent of their income towards accommodation are deemed to be living below the poverty line. ``We have this nice middle-class community in Warrnambool but it's now a very poor community because of the cost of housing.''And while many people appeared to have plenty of credit which allowed them to buy new cars, beneath the surface ``it's all going down the drain'', he said.A survey conducted by The Standard of Warrnambool car dealers has shown sales remain strong despite fuel prices hitting all-time highs and still rising.Greg Kelson, general manager of Warrnambool's South-West Motor Group, said his dealership's four-cylinder cars were attracting good sales, even as fuel prices recently topped 173 cents a litre. Callaghan Motors' dealer principal Steve Callaghan played down suggestions of a spending slow-down in the region, saying his new car sales were up about six per cent on this time last year. Despite high petrol prices and interest rates, strong milk prices ensured a promising outlook for the south-west and continued strong car sales, he said. Clinton Baulch, of Clinton Baulch's Nissan and Kia, thought people were buying new cars for their better fuel economy, with diesel engines a popular option. South-West Credit chief executive officer David Brown had noticed no change in demand for financial services but said he had heard discretionary spending in the region's retail sector had slowed recently.