Mayor Marion Barry last night signed into law a bill that temporarily removed the interest ceiling on residential mortgages in the District of Columbia, a move lenders said would start money flowing again into the city's home-buying market.

The measure eliminates the 11 percent ceiling on first mortgage loans for the next 90 days, letting lenders charge whatever the market will bring.

With money for housing loans virtually dried up, the D.C. City Council enacted the measure July 3 under an emergency provision.

T. William Bluemenauer Jr., Columbia Federal Savings president, predicted the city interest would rise to the range of 11 1/4 to 11 3/4 percent.

Home buyers in suburban Maryland and Virginia, where there is no legal limit on mortgage interest, are charged these rates.

With most would-be borrowers being turned away by lending institutions, some real estate brokers said, it has become increasingly difficult to sell homes in the city.

"for three or four months now, it has been very tight," said Flaxie Pinkette, president of John R. Plinkett Inc. "It just doesn't make sense for a lending institution to loan money at a lower rate that it takes the institution to get it."

David S. Orem, a broker who specializes in the far Northwest area, said the fund shortage has slowed "the rapid inflation in prices that we saw a year ago . . . and we're getting more contingent sales that won't go tho rough unless financing can be arranged."

The problem began last spring, several lending institution officials said, when the price their firms had to pay to depositors or investors for money to lend began pushing against the 11 percent ceiling then set by local law.

Conditions worsened, according to Washington Federal president James L. Harris, when inflation-sequeezed deposition began withdrawing money faster than others were putting it in.

In April, there was a net ourflow of $48 million in deposits. The city's savings and loans have total deposits exceeding $3.7 billion.

Some institutions stopped accepting any applications for D.C. mortgage loans. Robert McConkey, senior vice president of Perpetual Federal, the city's largest savings and loan association, said his firm restricted loans to longstanding depositors.

Washington Federal's Harris said he expected his firm and others would resume taking and granting applications.

But McConkey said the 90-day term of the new law would not help condominium developers and builders of new homes who seek mortgage loan packages to offer future buyers. These must be committed for in advance, McConkey said.

The major's approval also cleared the way for the ownership transfer of a 166-unit garden apartment in Northwest Washington, which is being acquired by its tenants for a conversion to condominium ownership.

Benny L. Kass, lawyer for the Ord-way-Poter Tenants Association, which is acquiring the profect form present owners Andrew and B. F. Saul for $2.6 million, said uncertainty over the interest rate had put the deal in some peril. With renovations, the project may ultimately represent an investment of $5.3 million, Dass said.

Kass was among those who lobbied to persuade the council to make the politically controversial decision to lift the ceiling. "a local legislature can't control national monetary or fiscal policies," he said.

The council at first considered raising the limit on first mortgage interest to 15 or even 18 percent but voted to remove the limit entirely. Ceilings of 11 1/2 percent on second trusts and 12 percent on condominiums and cooperatives were also eliminted.

Under the city's Home Rule Charter, the council can speedily enact emergency legislation that remains in effect for 90 days, subject to renewal. Enactment of permanent legislation typically takes several months and requires a Congressional review.

Donald G. 1west, excutive vice president of Weaver Brothers, a major mortgage banking firm, warned that the benefits of the new law to potential borrowers may last only about a month.

Toward the end of the 90 days, lenders will grant only loans that can be concluded before the law expires in October, he predicted. He said it ordinarily takes 30 to 60 days to proces a loan.

A council hearing on permanent legislation to replace the emergency law has been scheduled for Sept. 4. Jacqueline Helm, council finance committee staff director, said the council is almost certain to consider extending the emergency law another 90 days.

Barry originally and said he intended to approve the legislation Monday but delayed it, explaining to a reporter yesterday that he was not satisfied with a message drafted to explain why he was signing the bill. But when he signed the bill last night -- after aides said such action would be delayed at least another day -- he did not release a message. CAPTION: Picture, Mayor Marion BARRY . . . no ceiling for 90 days