A customer uses one of the ATMs that are lined up inside an office building in Seoul, June 28. Yonhap

Commercial banks are apparently enjoying windfall profits again, driven by the government's pressure to hike mortgage rates that allow the lenders to reap massive interest income.

Such pressure on lenders contradicts the government's widely practiced banking policy — reducing lending rates — to make it affordable for lower-income households and small business owners to take out bank loans.

The policy was also rooted in public criticism that lenders make no sweat to raise profits, mainly from net interest income stemming from a difference between higher lending rates and lower deposit rates.

Under the circumstances, the government is going against its own banking policy as more people are taking out housing loans, and this increase can undermine the government's plan to stabilize public livelihoods.

As of Thursday, the country's four major commercial banks — KB Kookmin, Shinhan, Hana and Woori — offered yearly mortgage rates averaging 4.4359 percent.

The average rate climbed from 4.353 percent at the end of June, despite a fall in the annual interest rate of a five-year, AAA-rated financial bond that does not guarantee principal.

A criterion in determining the housing loan rate, the bond rate slid from 3.451 percent to 3.323 percent within this month.

KB Kookmin Bank hiked its respective mortgage rate three times in July alone, including Thursday when it delivered a 0.20 percentage point increase.

Shinhan Bank plans to hike its rate by 0.05 percentage point, Monday, while Woori Bank is set to deliver a 0.2 percentage point increase, Wednesday.

"Against this backdrop, we're concerned that we'll solely take the blame for windfall profits after faithfully complying with the government's demands under its broad goal to lower household debts," a bank public relations staffer said on condition of anonymity.

The staffer noted that housing loans make up the largest portion of household debt, which is above 1,100 trillion won ($792.9 billion.)

According to the Financial Services Commission (FSC), housing loans from banks nationwide grew by 6.3 trillion won in June from the month before. The increase went up from a 5.7 trillion won month-on-month increase in May.

The staffer also noted that a widening lending-deposit rate gap can add to criticisms on windfall profits, especially when the Bank of Korea (BOK) weighs on the timing of its next rate cut over eased inflation.

In line with the BOK's possible rate cut, the four commercial banks lowered their deposit rates by an average 0.097 percentage point in July alone.

KB Kookmin lowered the rate by 0.1 percentage point. Shinhan cut the rate twice — 0.07 percentage point on July 8, and 0.05 percentage point on July 12 — while Hana cut its rate by 0.05 percentage point.

Net interest income has been a major source of revenue for the four major banks and their parent groups. For instance, the amount reached a milestone of 40 trillion won for the four groups combined in 2023.