Hong Kong Lenders Move Cautiously as Credit Recovery Shows Mixed Signals

Latest data from TransUnion and Hong Kong banking analysts indicate that households are increasingly selective in taking on new debt, particularly mortgages and credit cards. Although unemployment remains low and tourism recovery continues, the pressure from high interest rates has weakened purchasing power, leading to slower growth in discretionary spending and refinancing activity. Banks, in turn, have become more conservative in assessing borrowers’ capacity to service debt, especially for lower-income customers and small businesses still recovering from multi-year disruptions.

Corporate lending also shows divergence. Large corporates and multinationals continue to secure funding at favorable terms, supported by strong balance sheets and credit histories, while SMEs face tighter scrutiny and higher collateral requirements. Property-related lending, traditionally a core pillar for Hong Kong banks, has been restrained as the real estate market undergoes a gradual recovery marked by fluctuating prices and subdued primary-market activity. This has pushed lenders to diversify toward sectors with stronger forward earnings visibility, including technology, logistics, and healthcare.

Despite the caution, analysts say the overall financial system remains healthy, with solid capital buffers and liquidity ratios well above international standards. Banks are expected to ease their stance gradually as interest-rate cuts begin in major markets and Hong Kong’s own economic indicators stabilise. Until then, lenders will prioritize risk discipline over aggressive loan growth, reflecting a pragmatic approach to navigating mixed signals in the city’s evolving recovery landscape.