Hong Kong,

Hong Kong Consumer Lending Market Fundamentals Remain Sound in First Quarter of 2019

Delinquency rates broadly stable across all major lending categories

The newly-released TransUnion (NYSE: TRU) Q1 2019 Industry Insights Report shows that, despite the uncertainty resulting from the ongoing U.S.-China trade war and subdued economic growth, the Hong Kong consumer credit market remains in good health. Delinquency rates across all the major lending categories were broadly unchanged, and both originations and balances increased for credit cards, a key product providing consumer liquidity.

According to the TransUnion data during Q4 2018 (the latest available data for originations), credit cards experienced 4.6% year-on-year (YoY) originations growth. Credit cards have now also recorded four quarters of uninterrupted YoY balance growth, up 5.3% YoY with total outstanding balances of HK$139.6 billion in Q1 2019, a historical high.

However, not all products experienced similar growth. Unsecured personal loans saw 1.5% YoY growth in the 4th quarter which, while not as robust as credit cards, was still positive. In contrast, mortgages and unsecured revolving credit lines recorded YoY declines in originations in Q4 2018 of 4.2% and 3.7%, respectively. This is the second year of declining mortgage originations YoY, which dropped 4.1% YoY in Q4 2017.

“The continued rise in the popularity of credit cards concurrent with a decline in mortgage originations is a good indicator of both consumer and lender sentiment, and a reflection of some uncertainty in the economic outlook. With unemployment rates at a 10-year low and real wage growth increasing for 15 consecutive quarters, consumers remain confident in their near-term ability to spend and service their obligations, and continue to use their credit cards to facilitate their spending. However, the ongoing China-U.S. trade war and subdued Hong Kong GDP growth could be leading to longer-term uncertainty, with many consumers taking a more conservative view of the property market and associated mortgage borrowing,” said Francis Lau, director of research and consulting for TransUnion Hong Kong. “The good news is that consumers continue to perform very well on their credit obligations, with serious delinquency rates remaining low and largely unchanged for most lending products over the past year. This should give lenders reassurance that the retail credit market remains on solid footings.”

Q1 2019 Metrics for Major Credit Products

Credit Product

Q4 2018 Originations(1) – All Borrowers (K)

Annual Change

Balance-Level Serious Delinquency Rates(2)

Annual Change

Bank Credit Card




2 bps

Auto Loans




13 bps




0.05% (3)

1 bps

Unsecured personal loans




-2 bps

Unsecured revolving lines




6 bps

Source: TransUnion Credit Data

  1. Originations are viewed one quarter in arrears to account for reporting lag.
  2. Serious delinquency rates are 90 or more days past due for credit cards and 60 or more days past due for all other credit products.
  3. Delinquency data at a balance level except for mortgages which are at an account level because of the way data are collated.

Growth focus varies by product

As observed in previous quarters, originations growth for bank credit cards has come from consumers in lower risk tiers. In Q4 2018, over 90% of all new bank credit cards were from prime* or better risk tiers. This is in stark contrast to originations for unsecured personal loans and revolving credit lines, where 70% of new accounts went to customers in the near prime* or below risk tiers (i.e. higher risk categories).

This divergence is illustrative of the differences between consumers who are seeking each of these product types, as well as the unique strategies of the different lenders who focus on these lending products. Credit cards are generally issued by banks and monolines (i.e. single product lenders), whereas an increasing percentage of personal loans are now being issued by money lenders, who have pricing and risk management strategies that are more tailored to serving higher-risk borrowers. Money lenders have sought to aggressively grow their share of the personal loan market in recent years, and over the last two years have seen their share of total personal loan balances increase from 23% in Q1 2017 to nearly 28% in Q1 2019.

Mortgage market continues to cool

Mortgage originations, which are in part a reflection of consumers’ longer-term financial confidence, fell by 4.2% YoY in Q4 2018. This drop follows three prior quarters that saw increased or flat YoY originations, which contributed to an 8.7% increase in total outstanding balances over the year. The Q4 2018 mortgage originations drop occurred in the same quarter that mortgage enquiries—measuring the number of consumers applying for mortgage loans—fell 23% YoY. Interestingly, this drop in mortgage enquiries and applications occurred in the same quarter that residential property prices, measured by the Centra-City Leading Index (CCL), experienced a drop from a peak of 188.6 in August 2018 to 174.5 in December 2018.

While mortgage origination data for Q1 2019 are not yet available, the TransUnion report observed that enquiry volumes in the first quarter experienced a further 8% YoY drop. This continued drop in demand in Q1 2019 indicates that the weakness in mortgage originations may well have continued into the first quarter. However, the lower YoY enquiry decline in Q4 2019 relative to the larger Q4 2018 drop, as well as a rebound in the CCL to 179.5 at the end of March 2019, may be indicators of a potential recovery in mortgage demand in the second quarter of 2019 and beyond.

Lau continued: “Earlier in the year we hypothesized that mortgage lending had reached its inflection point, and the latest data seem to reinforce this idea. The decrease in both mortgage enquiries and originations over this latest quarter suggests heightened caution among consumers and lenders alike. The more recent recovery in residential housing prices may provide renewed confidence in the housing sector and spark an upturn in mortgage demand in the next one to two quarters. We will monitor this sector carefully to see if this recent weakness is a temporary inflection and demand recovers, or if economic concerns and perhaps other factors drive longer-term headwinds in mortgage lending.”

Low delinquency rates continue to provide reassurance

Despite a mixed picture for originations across consumer lending categories, delinquencies—a measure of consumers’ current ability to repay their financial commitments—remained low and stable. This continued benign delinquency environment is a reassuring commentary on the financial health of Hong Kong consumers.

Lau concluded: “Although credit risk is still at very low levels, lenders should closely monitor any change in delinquency rates across their portfolios. Given falling levels of economic growth and the current nature of China-U.S. trade relationships, other important factors like unemployment levels, wage growth and consumers’ overall ability to repay could start to face some challenges. For the moment, the consumer credit market remains relatively stable, but it is important not to be complacent. Scenario modeling and trended data analysis are becoming increasingly vital tools for lenders to manage their portfolio risk.”

For more information about the Q1 2019 TransUnion Hong Kong Industry Insights Report, please visit https://www.transunion.hk/lp/IIR

* Risk tier conversion for Hong Kong

Risk Tier

Credit Rating

Super Prime


Prime Plus




Near Prime









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