THE market for new lending for residential mortgages should grow to around £2 billion this year, up from £1.6 billion in 1994, the Irish Permanent has forecast.

The bank also predicts that interest rates should remain stable this year, but have just about reached their floor level.

The bank's treasurer, Mr Michael Torpey said yesterday that he did not expect a serious increase in mortgage rates because inflation was low and public spending was being controlled.

Mr Torpey, said there could be some increases if there was some volatility on international markets. ,He said there was "not a lot of room" to further reduce mortgage interest rates.

Hewns speaking at a briefing to announce the bank's new mortgage package.

New borrowers will not have to pay an application fee nor will they shave to pay a legal fee, as an Irish Permanent solicitor will not be required. There will be a 0.5 per cent discount in the first year.

Permanent says this will lead to a saving of £271 in fees plus an additional £250 in the first year of a standard £50,000 mortgage. The changes will cost around £3 million.

Meanwhile, First National announced details of its new fixed rate mortgages.

They range from 6.4 per cent for one year, to 8.6 per cent for five years.