Fast-rising mortgage interest rates have forced developers to spend thousands of dollars to subsidize purchases of new condominiums in the district of Columbia by "buying down" mortgage interest rates -- in some cases to as low as 11.5 percent -- according to real estate agents and developers.

Squeezed by interest rates that now average more than 16 percent and by a city law that makes it difficult to convert apartments into condominiums, the city's four-year love affair with condominiums has begun to sour, according to those in the industry.

Overall, condominium sales, including resale of existing units, are up this year by 11 percent compared with 1980. However, sales of new condominiums -- many of them to first-time home buyers -- has dropped by 37 percent and the number of conversions has slowed.

"The market is lagging and the higger interest rates have caused it," said Roger Dreeben, executive vice president of the Lewis & Silverman real estate company. "When the interest rates go up, people back off," he said, echoing the statements of many in the real estate industry. b

First-time sales in new or converted buildings in D.C. are down from 1,254 in the first five months of 1980 compared with 782 for the same period this year, according to Housing Data Reports, a local housing market analysis and consulting firm.

In Maryland and Virginia, condominium sales are running well ahead of last year's figures, a trend housing experts attribute to lower prices in the suburbs and greater enticements offered by developers.

"Buying down," a mortgage means the developer pays a bank or savings and loan association the difference between the market rate and the lower rate. The financial institution then sets aside a pool of money that is used by the buyers at the developer's project to secure mortgages. Most of these lower rates are good only for three to five years and buyers then will have to refinance their loans.

A drop of one to four percentage points in the interest rates can make a condominium affordable. For example, the monthly principal and interest payment on a $72,000 mortgage at 16 percent would be 968. But the montly payments are reduced to 910 if the interest is 15 percent, a $700-a-year savings. The same mortgage at 12 percent costs $741 and saves the homeowner $2,724 annually or $81,720 over 30 years.

The Brittany at 2001 16th St. NW is offering condominiums at 11 1/4 percent, nearly five points below the market price. That rate, however, is good for only five years. Eddie Lenkin, the developer of 2501 M St. NW, is selling 38 condominiums at 12 1/2 percent interest for 30 years and financing the project himself rather than forcing buyers to go to a mortgage lender for money.

Lenkin is the first developer in the city to combine residential condominiums and offices in the same building. "The office space was leased before the building was completed," Lenkin said. The housing is a different story. After 1 1/2 years, 14 of the condominiums, ranging in price from $92,500 to $235,500, are still unsold, he said.

At two projects in Foggy Bottom, the Bader and the Swarthmore, buyers can purchase units at a 15 percent interest rate, but they also are given a subsidy [2 percent of the mortgage for 18 months] paid in a lump sum at settlement that can be spent to pay off moving expenses or closing costs.

"We're competing with major developers that can buy down to 12 percent, so we offered this as an addditional incentive," said Despina Kaneles, the president of the Swarthmore tenants association, who now works for the developer whom the tenants selected to convert both buildings to condominium projects.

Developers are buying more newspaper advertising space to prominently display the interest rate they are offering, according to several real estate agents.

"If you get financing at 14 or 15 percent the lion's share of the purchasers cannot afford it," said Bob Beale, the assistant vice president in charge of condominiums and cooperatives at Legum and Norman. "If those interest rates are at 10 or 11 percent, we would see a boom again."

Condominium sales had been the bright hope of the city's housing industry and first-time home buyers after an almost relentless rise in interest rates during the last four years put detached and town houses out of the reach of a majority of first-time buyers.

The city's single men and women, young childless couples and some retired persons, many of whom work as lawyers, doctors, accountants and middle-level government bureaucrats, flocked to condominiums because they were cheaper, offered more security, less maintenance and the same tax deduction advantages as home ownership. Their demand triggered the conversion of 10,000 apartment units about 8 percent of the city's apartment stock.

The sale of detached and town houses dropped from 6,319 in 1978 to 4,066 last year, according to Rufus S. Lusk and Son, the real estate publishing firm. In 1980, while traditional home sales declined by 23 percent from 1979 levels, condominium sales were down by only 5 percent. Condominium sales accounted for nearly 50 percent of all homes sales last year in the city, Lusk reported.

While the average price of a city condominium -- $76,150 -- is still more than $35,000 cheaper than the $111,730 average price of a house, the high interest rates have put a vast majority of the condominiums out of reach for almost everyone but tenants living in buildings where a condominium conversion is planned.

These tenants usually can negotiate lucrative discounts in return for their consent to the conversion. The city gave District tenants this important bargaining tool three years ago when the City Council approved in law requiring that 51 percent of the tenants in a building consent to a conversion.

Some of the discounts amount to as much as 50 percent of the market price, according to several reat estate experts.

The high interest rates, combined with the more restrictive conversion provision, also have stemmed the transformation of apartment buildings to condominiums. Every year since 1976, growing numbers of apartment buildings have qualified to convert, a trend that peaked last year at 4,654. But this year, the city's condominium office has not even totaled the small number of conversion requests.

Fifty-six applications have been filed, but the large majority of them are for buildings that have been vacant for more than a year or have been used for stores or hotels and are therefore exempt from city laws governing conversions, according to housing department records. Most of the buildings contain fewer than 20 units.

Sales of new or converted units began to decline last October when interest rates topped 14 percent, but November and December are traditionally slow months for real estate sales. Sales did not revive in January or in the succeeding months. Several real estate officials say they now are noticing a slight upturn.

"We were selling about two a month and now sales are up to six or seven a month," said David Marshall, the developer of the Bader and the Swarthmore.

Those in the real estate industry are split on whether the public will adjust to the higher mortgage rates or continue not to buy. Beale, of Legum and Norman, is one of the pessimists.

"I don't see the situation changing," he said. "It's gloom and doom."