An emergency measure raising the maximum interest rate on real estate mortgages to a record 11 percent in the District of Columbia was signed into law yesterday by Mayor Walter E. Washington.
The measure, which took effect immediately, is expected by leaders of the financial and real estate industries to prevent a cutoff of mortgage money to home buyers in the city.
Mortgage money in the city has become increasingly tight in recent months. Brokers and buyers to make commitments because of uncertainty over the D.C. interest rate.
The normal statutory limit on mortgage interest in the city is 8 percent, but an earlier law that expires at the end of this month set a temporary limit of 10 percent.
Members of the city council said last week they were uncertain whether a continuation of the 10 percent rate would assure a continued supply of martgage money, and decided to raise the figure to 11 percent. The new law is effective for three months, and I can be renewed.
"So far as I know, there is no inclination among our members to raise the rate above 10 percent," said Bruce Bryan, executive vice president of the Metropolitan Washington Savings and Loan League. But he said the new 11 percent rate could be necessary "if the money market goes wild."
Charles Daniel, president of both the D.C. Bankers Association and the Union First National Bank, said the increase could encourage commercial banks to grant more home loans. Banks finance a relatively minor share of the real estate market.
James R. Ingham Jr., president of the Washington Board of Realtors and head of a brokerage firm doing business in D.C. and the Maryland suburbs, said there has been a downturn in the market for used homes since June 1, partly because of consumer resistance to higher interest.
"I hate to see it get to this level," Ingham said, "but it does keep us in business, so to speak."
Interest rates in the region have bumped the 10 percent lid in recent weeks. Downs payments on conventional loans, which had been 20 percent or less until recent months, have generally risen to 25 percent.
Mayor Washington also signed into law a two-year extension of the law that permits a 10 percent maximum interest rate.This means that, when the 11 percent emergency bill expires, the allowable rate will drop to 10 percent instead of to the normal 8 percent.
In another matter, the mayor vetoed a bill that would permit the city to sell surplus buildings, such as closed schools, to nonprofit groups and low income individuals at negotiated rates rather than by the normal bidding process.
In his veot message, the mayor said the City Council's aims could be between met by leasing the buildings at low rates than by selling them. He also objected to the legislation on procedural grounds.