KUALA LUMPUR (Oct 10): Malaysia’s household debt has largely normalised to pre-pandemic levels, reaching RM1.67 trillion or 84.8% of GDP as at June 2025, the Ministry of Finance (MOF) said in its Economic Outlook 2026.
This is broadly in line with the 83.8% of GDP recorded at end-June 2018, according to the Economic Outlook 2019.
The MOF said debt growth of 5.9% in 2025 was supported by prudent underwriting standards and improving labour market conditions.
Borrowings remain concentrated in residential property and car loans, which together make up about 75% of total household debt. Personal financing and credit card debt collectively accounted for 15.2% of total borrowings.
Median debt-service ratios stood at 33% for outstanding loans and 41% for new approvals, indicating adequate repayment buffers, the MOF said.
The loan-impairment ratio remained low at 1.1%, supported by restructuring programmes and assistance from the Credit Counselling and Debt Management Agency (AKPK).
Strengthening credit oversight through new Consumer Credit Act
The MOF said the government is strengthening credit-risk oversight through the upcoming Consumer Credit Act 2025, which will introduce a regulatory framework for non-bank credit providers, including Buy Now Pay Later (BNPL) operators.
The legislation, passed by the Dewan Negara last month and due to be gazetted by year end, will require such lenders to be licensed and authorised by the Consumer Credit Commission (CCC).
The CCC will oversee market conduct and enforce responsible lending practices by setting affordability and suitability standards, prohibiting predatory lending, and ensuring repayment obligations do not exceed prudent debt-service ratios.
In addition, the MOF said financial literacy initiatives and steady income growth are expected to strengthen repayment capacity and safeguard overall financial stability.