Malaysia's household borrowing cools, business loans hold firm

KUALA LUMPUR: Malaysia's household borrowing and loan applications have softened in August amid persistent cost-of-living pressures, although business lending remained firm.

Hong Leong Investment Bank Bhd (HLIB) said the trend reinforced expectations that the 2027 Budget would prioritise measures to ease household burdens, including continued subsidies and higher social assistance.

It said household loan growth eased marginally to 5.0 per cent year-on-year (YoY) in August from 5.1 per cent in July.

Household loan applications contracted by 5.1 per cent compared with a 1.7 per cent increase previously.

"The decline in household applications was broad-based across passenger cars, residential property, personal uses and credit card usage," HLIB said in a note.

Household loan approvals fell at a steeper pace of 10.4 per cent in August from a 2.4 per cent decline in July.

HLIB said household deposit growth also remained subdued, easing to 0.8 per cent YoY from 1.3 per cent previously, while household deposits fell 0.4 per cent month-on-month for the second consecutive month.

Total loan growth edged up to 5.7 per cent YoY in August from 5.6 per cent in July, driven by stronger business lending.

Business lending accelerated to 8.0 per cent from 7.6 per cent previously, led by lending to the information and communication, electricity, gas, steam and air-conditioning supply, as well as real estate activities sectors.

Overall loan applications slipped into contraction, falling 0.3 per cent in August compared with a 17.2 per cent increase in July.

Meanwhile, Malaysia's narrow money supply (M1) growth accelerated to 9.2 per cent YoY in August from 8.2 per cent in July, while broad money supply (M3) growth eased to 5.0 per cent from 5.7 per cent.

Gross corporate bond issuance declined to RM12.8 billion in August from RM20.5 billion in July, mainly due to lower issuance from the finance, insurance, real estate and business services, government and other services, and construction sectors.

Foreign investors also returned as net buyers of Malaysian bonds in August, recording net inflows of RM11.1 billion compared with net outflows of RM6.4 billion in July.

"Foreign investors returned to being net buyers of local bonds during the month, supported by strong economic fundamentals, benign domestic inflation and stable overnight policy rate expectations.

"In contrast, local equities recorded a net outflow of RM2.0 billion," it said.

HLIB maintained its 2026 gross domestic product growth forecast at 5.3 per cent, implying growth would moderate to 4.8 per cent in the second half of the year from 5.7 per cent in the first half.