The average lending rate for fresh loans extended by banks dropped in May from a month earlier on a large dip in the rates for businesses that more than offset a slight increase in rates for households, central bank data showed Friday.

The average interest rate on all new bank loans came to 3.62 percent last month, down 0.03 percentage point from the previous month, according to the data from the Bank of Korea.

The drop comes amid growing market expectation that the central bank may be poised to slash its policy rate to boost economic growth. The reading is the lowest since September 2018, according to the BOK. 

The lending rate for businesses came to 3.67 percent in May, down 0.04 percentage point from the month before, while that for households gained 0.01 percentage point to 3.49 percent.

The rise in the rate for households came despite a cut in the rates for both home-backed loans and credit borrowing for households as the ratio of credit loans, which usually carry a higher rate than home-backed loans, grew, the BOK said.

The government has been tightening restrictions on home-backed loans as part of efforts to prevent real estate speculation.

The average rate of home-backed loans came to 2.93 percent in May, down 0.05 percentage point from a month earlier and the lowest rate since October 2016, according to BOK.

As of the end of May, the average rate on all outstanding bank loans came to 3.71 percent, down 0.01 percentage point from the previous month.

The gap between the interest rates paid and charged by banks on fresh savings and loans came to 1.76 percent in May as the rate paid by banks on new savings lost 0.02 percentage point on-month to 1.86 percent, slower than the 0.03 percentage point drop for loans rates. (Yonhap)