Hong Kong Consumers Turn to Unsecured Loans to Cope with the Increase in Inflationary Pressures

  • Consumer demand and supply for unsecured loan and line products driving growth in credit activity
  • Increased cost of living leading to unusually cautious spending behaviour and shifts in product preferences
  • Fifth wave of COVID-19 along with inflationary pressures and anticipated interest rate hikes affecting overall consumer sentiment

Continued changes in Hong Kong consumers’ wallet profiles are being driven by macroeconomic pressures, including increasing inflation1 and four interest rate hikes since the start of the year2, according to TransUnion’s (NYSE: TRU) Q2 Industry Insights Report. The global information and insights company’s findings highlight a marked increase in the number of new unsecured personal loans and unsecured revolving credit lines, along with cautious spending on credit cards.

Unsecured personal loan originations increased by 6.7% year-over-year (YoY) in Q1 2022 (the latest period for originations due to reporting lag). Originations are a measure of new accounts opened and are a reflection of both consumer demand and lender appetite to advance credit. The total number of open unsecured personal loans increased by 5.2% YoY in Q2 2022, and over the same period the average balance for new personal loans also increased by 2.7%.

Originations of unsecured revolving lines increased by 81.3% YoY in Q1 2022 – this was in comparison to a relatively weaker quarter the year before for this category, and likely stimulated by the more favourable interest rates offered on this product type. The total number of revolving line accounts increased by 8.7% YoY in Q2 2022, although the average balance in this category fell by 9.1% YoY in the same period. This was primarily driven by increases in lending to consumers with prime and above credit scores3, with the share of originations to non-prime borrowers remaining steady. Low risk consumers tend to carry lower balances on revolving products, which may explain some of the decrease in overall average balances despite the increase in originations. At the same time, lenders are granting smaller credit limit amounts on new unsecured revolving line accounts to prime and above consumers—approximately half the average new credit limit compared to new limits assigned 12 months ago.

Countering the growth in new account openings for unsecured credit loan and line products, the number of credit card accounts in the Hong Kong market fell by 3.4% YoY. This was primarily caused by a 38.2% YoY decline in origination volumes in Q1 2022. Additionally, the average new credit card account credit line fell by 8.0% YoY in Q2 2022. Outstanding balances remained broadly static for credit cards as consumers took a cautious approach to spending. Consumers continued to perform well on their card payment obligations, with balance-level delinquencies for credit cards falling by two basis points (bps) YoY in Q2 2022.

The fall in the number of credit card accounts and in originations is likely due to a saturation of accounts in market, with most Hong Kong residents, on average, already holding more than two cards in pocket4. Government issuance of consumer vouchers via digital channels, and a lack of attractive promotions or favorable interest rates has made Hong Kong residents reluctant to apply for new credit cards.

The trends identified by the Q2 Industry Insights Report are also supported by the findings of the Q2 TransUnion Hong Kong Consumer Pulse Study, published in August. It reflected consumers’ cautious approach to spending, with 95% of consumers saying they were concerned about the current rate of inflation in Hong Kong. The study also found that 22% of consumers expect to be unable to pay at least one of their current bills or loans in full in the coming months, with 81% of respondents having said that their household income stayed the same or decreased in the preceding three months. This is despite the recent drop in the Hong Kong unemployment rate, which has improved each month since April 2022 but still remains above pre-pandemic levels.5

The same study highlighted that 45% of Hong Kong residents were cutting back on discretionary spending, including dining out, travel, and entertainment, with 16% cancelling subscriptions and memberships and 12% cancelling or reducing digital services.

Table 1: Q2 Metrics for Major Consumer Credit Products in Hong Kong

Credit product

Q1 – 2022 (i) Originations – Annual Change

Outstanding Balances – Annual Change

Balance-Level Serious Delinquency Rates (ii) (iii)

Balance-Level Serious Delinquency – Annual Change (Basis Points) (bps)

Credit Card




-2 bps

Loan on Card




1 bps

Auto Loan




6 bps





0 bps

Unsecured Personal Loan




4 bps

Unsecured Revolving Line




3 bps

Source: TransUnion Hong Kong (except for mortgage data which is from the Residential Mortgage Survey (June 2022) published by the Hong Kong Monetary Authority)
i. Originations are viewed one quarter in arrears to account for reporting lag.
ii. 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.
iii. Delinquency data are reported at a balance level except for mortgages and loan on card, which are reported at an account level.

Shift in saving and investment strategies

“The significant growth in unsecured loans and revolving lines indicates a clear shift in consumer preferences and needs in light of the rising cost of living. This shift has likely led to the unusually cautious spending behaviour that has mostly impacted the credit card market,” says Marie Claire Lim Moore, Regional President, Asia Pacific and Hong Kong CEO of TransUnion. “With strong macroeconomic headwinds impacting the market, consumers are understandably cautious about credit usage.

The Q2 TransUnion Hong Kong Consumer Pulse Study findings support this with consumers starting to focus more on savings rather than on spending and investments – the number of Hong Kong residents saving more in their emergency fund increased by four percentage points, to 45% from Q1 to Q2 2022.

“Consumer sentiment during the second quarter may also have been impacted by the fifth wave of COVID-19 and associated inbound travel restrictions,” Lim Moore says. “It will be important to see how the market responds to the relaxation of travel restrictions and quarantine rules with the introduction of the ‘3+4’ approach to COVID-19 during August 2022,” adds Lim Moore6.

Secured lending reflects cautious sentiment

Secured lending trends often reflect consumers’ long-term sentiment, given the length and amount of commitment implied by a mortgage or auto loan agreement. Overall growth among secured products like mortgages and auto loans has slowed down compared to growth rate peaks earlier in the pandemic.

YoY originations growth for mortgages, although still positive, was 1.1% in Q1 2022 and was well below YoY growth levels recorded at the end of last year (Q4 2021 YoY change: 19.2% and Q3 2021: 25.1%). The total number of auto loan accounts decreased by 10.2% YoY in Q2 2022, with a 25.8% YoY fall in origination volumes in Q1 2022. The slowdown in secured credit products is an indication of a caution in consumer sentiment towards taking on major financial commitments during times of uncertainty.

“As we navigate challenging economic conditions, it is important for lenders to look for resilient consumer segments by assessing the credit needs and preferences of their existing customers,” says Lim Moore. “In light of the rising cost of living, there are segments of consumers who may need to leverage credit to cope with economic pressures. By leveraging enhanced insights that help predict consumer credit needs and behaviours, lenders can serve these consumers effectively to drive portfolio growth in the near future,” concludes Lim Moore.

For more information about the Q2 2022 Hong Kong Industry Insights Report and to register for the webinar scheduled for 28 September at 3:00pm HKT, please click here.

1 Hong Kong Inflation Rate - July 2022 Data - 1981-2021 Historical - August Forecast (
2 Hong Kong Interest Rate - 2022 Data - 1998-2021 Historical - 2023 Forecast - Calendar (
3 TransUnion CreditVision® risk score: super prime = AA; prime plus = BB; prime = CC; near prime = DD to HH; subprime = II to JJ. Prime and above = AA to CC; below prime DD to JJ
4 Total number of credit card in market divided by total population comes to 2.6 credit cards per person
5 Hong Kong Unemployment Rate - July 2022 Data - 1981-2021 Historical - August Forecast (
6 Arrivals in Hong Kong now only have to isolate in a hotel room for three days, instead of seven. This is followed by four days of medical surveillance, including rapid antigen and polymerase chain reaction testing, and limited public activity. Arrivals must also comply with restrictions under the amber code system.  Explainer: Hong Kong's '3+4' Covid-19 hotel quarantine arrangements for international arrivals - Hong Kong Free Press HKFP (