Legislation that could provide additional financing for housing sales in the city later this year has been approved by the D.C. City Council.

Separately, the city's largest thrift institution -- Perpetual Federal Savings and Loan Association -- has reduced to 16.5 percent from a record 17 percent the interest rate it charges on 80 percent first mortgage loans, as a slow downward trend in mortgage rates appears to be in progress.

Perpetual was the nation's first major mortgage lender to post a 17 percent rate earlier this year when interest rates soared -- part of a government-mandated program of curbing credit to slow a stubborn inflationary spiral.

The D.C. City Council legislation, sponsored by John A. Wilson (D-Ward 2), who heads the Finance and Revenue Committee, would permit a resumption of so-called "balloon" loans for house transactions by owner-occupant sellers or federally regulated financial institutions.

Mayor Marion Barry Jr., who is expected to approve the meausre, will get the bill in about a week, after which he has two weeks to act.After that, Congress has 30 legislative days to veto the bill before it becomes law. t

Balloon loans were outlawed in the city after a number of residents became the victims of lenders who financed various home improvements.

Under balloon loans for second trusts, which already are legal in Maryland and Virginia and many other states, relatively-short-term loans can be arranged with standard monthly payments and the balance due in one lump sum at a date certain -- often at the end of five years, for example.

Use of this financing -- such as a second trust by the current owner in selling a house -- provides buyers an extra source of funds. Refinancing for the full amount of mortgage requirements then could be made later after the interest rate spiral has cooled off.

Under current law, with such final lump-sum loans prohibited, sellers must agree to longer-term loans (15-20 years) on second trusts in order to make monthly payments low enough for most families to afford.

As Wilson described the measure, it would allow for a situation "where the seller has existing mortgages or deeds of trust which are assumable and is willing to take back another trust from the purchaser, provided it could be paid off in a short period of time."

At the same time, the City Council bill will not lead to a quick infusion of new money because it sets a 15 percent maximum on second trusts. Until the cost of money to lenders falls below that level for a period of time, financial institutions aren't expected to agree to such financing although many individual sellers might be interested, industry sources said yesterday.

Thomas Owen, chairman of Perpetual, hailed the City Council action. "It's going to help a lot . . . by outlawing balloon payments (in earlier years), the government precluded the entire borrowing public from borrowing" with agreements for large final payments, Owen said.

In another development yesterday, Federal Home Loan Bank Board Chairman Jay Janis forecast that housing mortgage rates "hopefully" will decline to 12-13 percent by the end of the year. Mortgage rates are currently averaging 15 percent nationwide and more than 16 percent locally.

Speaking at a news conference in New York, Janis said he also sees a surging demand for housing in the 1980s. But 1980 will be "a difficult year for the savings and loan industry," Janis told the Federal Home Loan Bank of New York annual meeting, United Press International reported.