Sustainability

• Credit card originations rose by 30.7% as demand grew, with below prime originations up by one third year-over-year (YoY)
• Vehicle finance originations grew significantly YoY, indicating growing momentum in the automotive industry
• Non-bank personal loans saw highest delinquency rate since previous high point in Q2 2021

According to TransUnion’s (NYSE:TRU) Q1 2025 South Africa Industry Insights Report, the growth in originations of new credit cards, at 30.7% year-over-year (YoY), far outstripped growth for other consumer credit products during the first quarter of the year.

Strong growth in credit cards was driven, in part, by lenders extending cards to more below prime[1] borrowers than they did one year ago – up 33.1% YoY. Subprime and near prime borrowers accounted for 69.3% of credit card originations, up from 64.3% one year earlier. At the same time, lenders looked to actively manage the increased risk profile of borrowers by limiting the average credit limit on new credit cards – down 13.1% YoY.

Growth is likely to remain buoyant in the South African credit card market, with 33% of respondents to TransUnion’s recent Q1 2024 Consumer Pulse Survey saying that they planned to apply for a new credit card in the next 12 months.

Credit card average account balances increased by 7.1% YoY, although lenders’ default concerns may have been eased by the 20-basis point (bps) decrease in account-level delinquencies* over the same period, standing at 12.3% in Q1 2025.

“While inflation has dropped to the low end of the South African Reserve Bank’s target range during Q1 at close to 3%, South Africans are still experiencing financial pressures from prior price increases, turning to credit to help them make ends meet,” says Ayesha Hatea, director of research and consulting at TransUnion. “Despite these strains, consumers have increasingly prioritised keeping their credit cards in good standing, as they likely want to ensure access to the ongoing liquidity that this credit product provides.”

Vehicle loans grew at double-digit rate

The vehicle loans market continued to show encouraging signs of continued growth, as origination volumes increased by 11.6% YoY in Q1 2025. The average value of new loans also rose by 3.0% over the same period.

The highest growth rate continued to be among Gen Z[2] consumers, up 28.5% YoY. Within the Gen Z cohort, 62% of new vehicle loans were opened by consumers in the oldest subgroup in this generation, aged 26 to 29 years. This trend suggests that older Gen Z consumers are becoming increasingly active in the vehicle finance market, likely as they reach key life stages such as career stability and household formation. While this group is not necessarily New-to-Credit, their growing share of originations highlights a valuable opportunity for lenders to engage younger, upwardly mobile consumers.

In contrast, the share of vehicle loans declined across all other generations, with the exception of Gen X, where volumes remained relatively stable. This reinforces the importance of targeting older Gen Z consumers as a key growth segment in the vehicle finance space.

With a 0.25% repo rate cut announced by the South African Reserve Bank (SARB) in January followed by another in May, demand for vehicle loans is likely to remain buoyant, with more than one fifth (22%) of South Africans surveyed in the TransUnion Q1 Consumer Pulse Survey indicating that they intend to take out a new car loan or lease in the next 12 months.

“With vehicle ownership is a priority due to limited public transport offerings, buying a vehicle is often a first step into secured credit for young professionals,” said Hatea. “Vehicle finance often requires relatively small deposits, and flexible financing options can be negotiated to make monthly repayments more affordable. Borrowers don’t need as extensive a credit history to purchase a vehicle as they do to buy a home. Successfully managing a vehicle loan demonstrates financial responsibility, which can strengthen future home loan applications.”

Personal loans leveraged for meeting monthly expenses

During the first quarter of the year, consumers also increasingly turned to personal loans as strategic tools to achieve their financial objectives, with originations growing for both bank and non-bank personal loan lenders – up 2.7% and 11.5% YoY, respectively. Demand for personal loans will likely continue, with 35% of surveyed South Africans saying that they intend to apply for a personal loan in the next 12 months.

However, non-bank lenders may yet have to refocus their risk management strategies in the coming months as more than two in five (41.3%) of South Africans who hold one of these loans – 83.9% of whom are below prime borrowers – being three months or more in arrears during Q1 2025. This is a 520-basis point (bps) YoY increase and is the highest delinquency rate for this product since the previous high of 39.1% in Q2 2021.

The delinquency rate among non-bank personal loans was 15 percentage points higher than delinquencies on bank personal loans, where below prime borrowers comprise 71.8% of the bank personal loans book.

“South Africans are increasingly turning to low-value personal loans with shorter repayment terms to manage their monthly expenses. However, persistently high delinquency rates — particularly among non-bank personal loans — indicate that many consumers are under significant financial pressure and struggling to meet their loan commitments,” says Hatea. “As lenders respond to growing demand for this type of credit, it’s essential they align their growth strategies with prudent risk management to ensure long-term sustainability.”

Home loans remain under pressure

Home loans were the only sector to experience a decline in originations in Q1 2025, down 10.8% YoY. Although originations fell across all risk tiers, loans to prime and above consumers saw a particularly sharp decline, down 21.1% YoY. This continues the downward trend in home loan growth observed since Q1 2020, with exception of a moderate YoY increase between Q1 2022 and Q1 2023.

“The fact that even prime consumers are pulling back from the housing market is a clear signal that affordability remains a significant barrier,” said Hatea. “This trend has implications not only for the credit market, but also for broader economic activity tied to home ownership and property development.”

As the housing finance sector continues to soften, lenders may need to reassess their strategies. This includes rethinking product design and pricing, as well as how they connect with younger consumers and first-time buyers, in order to reignite demand in a segment that has traditionally served as a foundation of secured lending.

 Table 1: Key South African Credit Market Metrics (Q1 2025 vs Q1 2024)

Product	YoY origination growth	Serious account-level delinquency rate*	YoY basis points (bps) change in delinquency rate
Credit card	30.7%	12.3%	-20 bps
Bank personal loan	2.7%	26.3%	14 bps
Non-bank personal loan	11.5%	41.3%	520 bps
Clothing accounts	7.6%	25.9%	-294 bps
Retail instalment	16.0%	27.1%	-138 bps
Retail revolving	5.4%	14.9%	-350 bps
Home loans	-10.8%	7.4%	19 bps
Vehicle finance	11.7%	5.4%	-1 bps

 *Account-level serious delinquency rate, measured as a percentage of accounts three or more months in arrears

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[1] ^{Scores are based on TransUnion’s CreditVision® generic scoring methodology. Risk distribution key: subprime (0-625), near prime (626-655), prime (656-695), prime plus (696-720), super prime (721-999).}

[2] ^{TransUnion age distribution: Gen Z (Born 1995 – 2010); Millennials (Born 1980-1994); Gen X (Born 1965-1979); Baby Boomers (Born 1946-1964}