Hong Kong Consumer Credit Market Saw Areas of Growth Amid Diverging Trends in Q1 2025

• Credit card originations slowed down due to 13-month retail sales slump
• Demand for personal loans increased in Q4 2024, lenders met demand with caution as loan values remained lower than prior year
• Mortgage growth accelerated amid supportive policies and attractive property prices following continued market correction

Soft retail spending in Hong Kong drained growth momentum from the territory’s credit card market, with originations down 4.5% YoY in the last quarter of 2024[1]. The slowed retail spending, in its thirteenth month[2] of negative growth, will likely impact originations activity in the first quarter of 2025. Despite a decline in new card growth, the number of accounts and outstanding balances declined only very slightly in the first quarter of 2025, down 1.1% and 0.1% YoY, respectively. These are some of the insights reflected in TransUnion’s (NYSE: TRU) Hong Kong Industry Insights Report for Q1 2025[3].

Even as the number of credit card accounts in Hong Kong was close to static, the profile of cardholders was evolving, with originations among Gen Z consumers[4]  increasing by 10.2% YoY, boosting their share of total originations to 26.9% and surpassing the originations by Gen X consumers for the first time.

Looking at lender types, consumers increasingly turned towards non-bank lenders for credit card originations. In Q4 2024, 80.4% of credit card originations were from traditional banks, down from 83.2% the previous quarter.

With 93.7% of Hong Kong cardholders in prime[5] and above risk tiers, delinquencies also remained consistent with prior year levels, with balance-level delinquencies in Q1 2025 at 90 days past due (DPD) seeing only a two basis point (bps) YoY uptick to 0.21%.

Personal loan originations surged, but shifted towards smaller value loans

The TransUnion Industry Insights Report also shows that Hong Kong’s personal loan market rebounded in volume during Q4 2024, with originations up 6.6% YoY, although the average opening loan amount for new loans in Q4 2024 was 2.9% less YoY.

The volume growth was more substantial among Gen Z consumers – up by 35.4% YoY, accounting for 15.5% of originations and a share increase of 3.3 percentage points YoY. At the same time, originations to subprime consumers continued to decrease while those to all other risk tiers increased, indicating that lenders increased their focus on less risky consumers.

Consumers continued to shift away from traditional banks for new personal loans: money lenders accounted for 51.7% of originations, with traditional banks providing 40.7% of new personal loans. Although coming off a low base, originations by digital banks more than doubled YoY, with their share of personal loan originations increasing to 7.6%, up from 3.4% over the same period in the previous year.

“Although lenders extended more new personal loans, the size of loans decreased. This indicates that although lenders are willing to meet demand, they are doing so with caution. For lenders, there is opportunity to meet consumer demand with disciplined risk-based pricing and bundling strategies, along with early detection tools to mitigate default risk,” said Weihan Sun, principal of research and consulting for Asia Pacific at TransUnion.

Revolving line demand softened as lenders shifted towards higher-limit, lower-volume strategies

Revolving line originations volumes contracted YoY as performance metrics continued to deteriorate, prompting lenders to re-evaluate their growth strategies in the context of persistent high delinquency levels and charge offs. This was of particular note among digital banks, where there has been a sharp slowdown from double-digit growth in prior quarters.

Origination volumes decreased by 7.9% YoY in Q4 2024, with average limits on new accounts decreasing sharply by 38.4% YoY in the quarter. This drop was primarily due to lower originations from digital banks (down by 29.5% YoY), likely due to deteriorating performance for recent originations, particularly among the near prime consumer risk tier. Delinquency performance across near prime consumers at 30 DPD after six months on book was 2.29% for Q1 2024 originations, 2.98% for Q2 2024 originations, and 3.07% for Q3 2024 originations. The deterioration was sharper among digital bank revolving lines, with performance under the same terms being 2.07% for Q1 2024 originations, 3.32% for Q2 2024 originations, and 3.46% for Q3 2024 originations.

This more cautious lending approach was potentially a reaction to increased delinquencies, up by 15 bps YoY to 0.52% at an account level, while consumer-level delinquencies for the same period were up by 28 bps YoY to 1.06%. These higher delinquencies were likely because revolving lines are lower in consumers’ payment hierarchies, with bigger-ticket or secured loans taking priority.

“Digital banks’ revolving line originations volumes decreased by nearly one third during the latest quarter as these lenders adapted their lending strategies in response to increased delinquencies, prioritising more resilient consumers,” said Sun. “At the same time, traditional banks and money lenders recorded increases in their share of originations as a result, with money lenders leading in volume and share shift as they took up opportunities declined by digital banks. This reflects a deliberate shift towards higher-limit, lower-volume lending to better-risk borrowers in a strategic response to increased defaults for this product.”

Mortgage growth accelerated amid continued property market correction

The Hong Kong Monetary Authority (HKMA) reported that mortgage originations rebounded sharply in Q1 2025[6], This increase was likely due to supportive polices following HKMA’s relaxing of loan-to-value rules, allowing up to 70% loans for most residential properties[7], as well as more buyer-friendly pricing and stable interest rates.

According to the Global Property Guide, Hong Kong’s residential property price index has experienced 13 consecutive quarters of YoY price falls, which when adjusted for inflation, means that property prices in the territory have declined by 9.0% over the same period, and are down nearly 30% from 2021 peaks[8].

In the context of this environment, mortgage origination volumes as published by HKMA increased by 18.7% YoY, and the average value of new mortgages increased by 9.6% YoY in the same quarter, while the number of outstanding accounts increased by 22.4% YoY in the period.

“This resurgence in the Hong Kong property market creates an atmosphere that is particularly favourable for first-time home buyers, for whom affordability has long been a challenge,” said Sun. “As more people buy homes, increased property ownership is likely to drive growth in other credit products, as new homeowners will likely need to expand their credit wallets with personal loans to purchase bigger ticket items such as appliances or larger décor elements, or they may turn to a revolving loan or credit cards to fund renovations. These developments may serve as a catalyst for renewed momentum across the broader credit landscape.”

 
1 Originations and enquiries are viewed one quarter in arrears to account for reporting lag

2 C&SD: Table 620-67001: Total Retail Sales

3 TransUnion's first Industry Insights Report for Hong Kong in 2025 is based on data from the Credit Reference Platform under Credit Data Smart (CDS), following the full migration by the end of November 2024. Future reports will continue to leverage data from this source.

4 Generations are defined as follows: Gen Z, born 1995–2004; Millennials, born 1980–1994; Gen X, born 1965–1979; and Baby Boomers, born 1944–1964 

5 TransUnion CreditVision® risk score: Subprime = JJ to II; Near prime = HH to DD; Prime = CC; Prime plus = BB; Super prime = AA

⁶ According to the Hong Kong Monetary Authority releases on mortgage data from January to March 2025

7 Hong Kong Monetary Authority: Countercyclical Macroprudential Measures for Property Mortgage Loans

8 Finimize: Hong Kong Home Prices Sink Amidst Economic Strain