TransUnion sees credit normalise after HKMA rate cuts

For 2026, TransUnion advised lenders to adopt a flexible, data-driven approach. 

Hong Kong’s consumer credit market is set to return to more “normal” conditions following recent rate cuts that have eased borrowing costs, according to TransUnion.

After the US Federal Reserve lowered interest rates, the Hong Kong Monetary Authority reduced the Base Rate to 4.25% in October 2025. Major banks responded by trimming prime lending rates, setting the stage for renewed credit activity.

Whilst this supports demand, TransUnion cautioned that lenders may face margin compression. The macroeconomic environment is described as cautiously positive. 

Income growth remains modest and youth unemployment has edged higher, but retail sales are improving and housing sentiment is stabilising, indicating a steady, if uneven, recovery.

TransUnion identified four key indicators that lenders should monitor. First, approval mix and pricing discipline, keeping approvals targeted and pricing appropriately to risk, will be essential.

Second, early payment behaviour, particularly 30- and 60-day repayment performance, offers insight into borrower health. Any uptick in early delinquencies, especially among younger or more leveraged consumers, may indicate stress.

Third, lenders should closely track the speed at which they pass on rate changes to borrowers. TransUnion encourages the use of dynamic pricing to maintain risk-adjusted returns in a shifting rate environment.

Fourth, monitoring district-level housing sentiment could offer early signals of where mortgage demand is recovering. In those areas, service quality and loan turnaround speed may provide a competitive advantage over headline rates.

For 2026, TransUnion advised lenders to adopt a flexible, data-driven approach. If key indicators remain stable, institutions should expand capacity to meet returning demand.

If conditions soften, the recommendation is to narrow credit offers and prioritise more resilient customer segments.

The firm noted that real-time decision-making, execution speed, and focused risk management will be critical as Hong Kong’s credit market adjusts to its post-tightening phase.