Hong Kong banks may boost tax loan campaigns as Fed rate cut looms

Demand for debt consolidation may also rise.

Banks in Hong Kong may launch more competitive campaigns during the tax loan season whilst demand for debt consolidation may rise following an expected September 2025 rate cut by the US Federal Reserve.

Any rate cut from the US Fed will likely prompt the Hong Kong Monetary Authority (HKMA) to lower its base rate, and in turn lead banks to adjust their prime rates accordingly, noted Marie Claire Lim Moore, APAC regional president and Hong Kong CEO at TransUnion in a commentary on 5 September 2025.

This would create a more supportive environment for consumer lending, she said.

In particular, demand for debt consolidation and new borrowing is expected to rise as consumers facing higher repayment burdens seek more affordable refinance options.

TransUnion’s Consumer Pulse Study for Q3 2025 found that 48% of Hong Kong consumers surveyed are considering applying for new credit or refinancing existing credit within the year. This is reportedly the highest level recorded over the past five quarters, or since Q3 2024.

Meanwhile, tax loans may gain popularity amongst middle-class households after the halving of the one-off tax reduction ceiling from HK$3,000 to HK$1,500 for profits tax and salaries tax in the 2025-26 Budget. This may drive banks to launch more competitive loan campaigns during the tax season.

Revolving credit could also become increasingly attractive for liquidity needs, especially amongst younger and lower income segments, she added.

Card usage could also rise.

“[Whilst] annual percentage rates (APRs) may remain elevated compared to other loan types, card usage and spending are expected to increase, driven by improved consumer confidence in discretionary spending and borrowing,” Lim Moore said.

On the secured lending front, the mortgage market may also see more activity, with the Hong Kong Interbank Offered Rate (HIBOR) often adjusting more quickly to the US rate cut.

“Lower mortgage rates are expected to reduce the repayment burdens, easing financial pressure on homeowners and attracting new buyers for both residential and investment purposes, ultimately boosting more active property demand,” she said.

However, whilst a potential rate cut may offer much-needed relief to household financing, it also carries risks by fuelling credit appetite.

“Lower borrowing costs could lead to increased household debt exposure. Although Hong Kong consumers generally exhibit stronger repayment discipline compared to those in other developed credit markets, structural repayment risks remain,” Lim Moore warned.

“The growing appeal of revolving lines also raises concerns, as some consumers may rely on minimum payments, potentially resulting in long-term financial strain,” she added.