Rising Household Debt Trend Needs Attention, Housing Financing Biggest Contributor

KUALA LUMPUR: The increase in Malaysia’s household debt to RM1.73 trillion as of March 2026 remains at a manageable level, but the sustained upward trend warrants attention to avoid risks to the economy and the nation’s financial stability.

Economics Lecturer at the Faculty of Management and Business, UiTM Johor Branch Segamat Campus, Dr Juliana Mohamed Abdul Kadir said, although the debt-to-GDP ratio has slightly declined compared to 84.7 per cent last year, the overall household debt continues to rise year on year.

She said household debt increased from RM1.53 trillion in 2023 to RM1.63 trillion in 2024, before reaching RM1.67 trillion in 2025 and further rising to RM1.73 trillion in March this year.

“Overall, the household debt position can still be considered manageable in line with economic growth and population increase, but it deserves serious attention as the amount is already at a high level.

“High debt repayment commitments also limit household disposable income for savings and other expenditures. Moreover, in the Southeast Asian region, Malaysia is also among the countries with the highest household debt ratios, similar to Thailand,” she told Bisnes Metro.

According to her, housing loans remain the largest contributor to household debt, accounting for 63 per cent of total financing, followed by vehicle loans (15 per cent), personal financing (8.0 per cent), non-residential property loans (6.0 per cent), credit cards (4.0 per cent) and securities purchases (4.0 per cent).

She said the increased use of digital facilities, including buy now pay later (BNPL) schemes, has also contributed to household debt growth, with the value of such financing rising to RM4.9 billion as of December 31, 2025.

“The factors behind the increase in household debt are not only due to the rising cost of living, but are also influenced by changes in consumer spending patterns as well as the ease of obtaining financing digitally,” she said.

Juliana said if the rising debt trend continues without being supported by income growth, it could affect the people’s purchasing power and slow down the country’s economic growth.

She said a reduction in domestic spending would impact business activities, subsequently limiting job opportunities and increasing the unemployment rate.

“Households with high debt commitments are also more vulnerable to risks from rising inflation, interest rates and global economic uncertainty, which could increase the risk of default.

“Although household debt remains at a manageable level, the continued increase needs to be controlled through more disciplined financial management to ensure the stability of the country’s financial system,” she said.

Commenting on measures that need to be taken, she said the government should focus on efforts to increase the people’s income through the creation of competitive jobs, productivity enhancement and strengthening the domestic economy, while also reducing cost of living pressures.

In addition, she said the government needs to increase the construction of affordable homes, rent-to-own schemes and the Hardcore Poor Housing Programme, while ensuring that project implementation is monitored so that the benefits are truly enjoyed by the people.

She also suggested that financial institutions tighten credit assessment based on borrowers’ actual capacity, while households need to be more disciplined in managing their finances, prioritising emergency savings and reducing reliance on debt financing for asset purchases.

Harian Metro