(Adds details on borrowing costs, earmarked loans)
BRASILIA, May 29 (Reuters) - Lending growth in Brazil slowed in April from March as borrowing costs remained at their highest in two years.
Outstanding loans in Brazil's banking system rose 0.6 percent in April, the central bank said in a report on Thursday, down from 1 percent growth in March from February.
The so-called earmarked loans, or credit aimed at investments and homebuilding in accordance with government mandates, rose 1.9 percent from March, while non-earmarked loans increased 0.9 percent.
Disbursements at Brazilian private-sector banks rose about 5.3 percent in the 12 months through April, compared with 20.5 percent at state-run lenders, the report added.
President Dilma Rousseff has used state banks to push down Brazil's credit costs, among the world's highest for a major economy, while fostering competition with private banks.
The average cost of borrowing for non-earmarked loans in the banking system, a gauge of how much Brazilians pay in interest for a loan, remained unchanged from the previous month at 31.7 percent, the highest in two years, according to the report.
Borrowing costs have risen in Brazil after the central bank raised the benchmark overnight Selic lending rate nine times in the past year to head off inflation.
The spread, the difference between the rate at which banks lend money and that at which they pay for deposits, widened to 12.5 percentage points from 12.3 in March.
Loans in arrears for 90 days or more, the industry's benchmark gauge for credit delinquencies, remained unchanged for a fourth straight month at 4.8 percent, the report said.
Loans made by all banks in Brazil totaled a record 2.777 trillion reais ($1.25 trillion) last month, up from March's 2.760 trillion, the report showed.
$1 = 2.225 Brazilian reais Reporting by Luciana Otoni; Writing by Asher Levine; Editing by Chizu Nomiyama and James Dalgleish