Soft retail spending in Hong Kong drained growth momentum from the territory’s credit card market, with originations down 4.5% year-on-year ( YoY ) in the last quarter of 2024, and the slowed retail spending – in its 13th month of negative growth – will likely impact originations activity in the first quarter of 2025, according to a recent report.

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, finds information and insights firm TransUnion’s Hong Kong Industry Insights Report for Q1 2025.

Even as the number of credit card accounts in Hong Kong was close to static, the profile of cardholders was evolving, the report notes, with originations among Gen Z consumers 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- 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 ( bp ) YoY uptick to 0.21%.

Personal loan originations shift towards smaller value

Hong Kong’s personal loan market rebounded in volume during Q4 2024, the report points out, 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, the report shares, as 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,” says Weihan Sun, TransUnion’s research and consulting principal for Asia-Pacific. “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.”

Revolving line demand softens

Revolving line originations volumes contracted YoY as performance metrics continued to deteriorate, the report shares, 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, and 3.07% for Q3 2024. 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, and 3.46% for Q3 2024.

This more cautious lending approach was potentially a reaction to increased delinquencies, up by 15bp YoY to 0.52% at an account level, while consumer-level delinquencies for the same period were up by 28bp 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, prioritizing more resilient consumers,” Sun states. “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 accelerates

The Hong Kong Monetary Authority ( HKMA ) reported that mortgage originations rebounded sharply in Q1 2025. 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, as well as more buyer-friendly pricing and stable interest rates.

Hong Kong’s residential property price index, according to the Global Property Guide, 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.

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,” Sun adds. “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.”