Bank lending rates on new household loans dropped from a month earlier in July and interest paid by banks on new deposits also fell, central bank data showed Friday.

The average interest rate on fresh household loans extended by local banks came to 2.96 percent last month, down 0.10 percentage point from the previous month, according to the Bank of Korea.


The July reading marked the fourth consecutive months of drop.

The decline could prompt additional household borrowing, which had reached a record high of 1,257.3 trillion won ($1.128 trillion) as of end-June.

On Thursday, the government vowed to control the supply of new apartments in a bid to curb demand for mortgage loans, the main culprit behind soaring household debt in Asia's fourth-largest economy.

The average interest rate on new home-backed loans came to 2.66 percent in July, down from 2.77 percent the previous month, according to the BOK.

The average interest rate on all new loans slipped 0.08 percentage point over the cited period to 3.23 percent as the rate on new corporate loans came to 3.37 percent, down 0.04 percentage points from the previous month.

The average rate paid by banks on fresh deposits shed 0.12 percentage point to 1.32 percent over the cited period.

The gap between the interest rates paid to and by banks came to 1.91 percent, compared to 1.87 percent in the previous month. (Yonhap)