IN a radical move, one of the State's largest banks has agreed to provide mortgages for the unemployed.

As part of a pilot scheme to be launched in April, Bank of Ireland, in partnership with the Department of the Environment and the Rural Resettlement Ireland organisation, has agreed to give special low rate mortgages to unemployed people who wish to move their families from cities to rural areas. The scheme will initially involve 100 people.

A Bank of Ireland spokesman staid yesterday the scheme held enormous attractions" for both the bank and the wider community and he was confident it would be extended in the future. Bank of Ireland will participate in a full review of the pilot scheme, he said. A senior bank official has been seconded to work full time on the programme.

While negotiations are continuing, the bank is understood to be prepared to offer special fixed rate mortgages at a substantial discount to normal rates. Borrowers eligible to qualify under the scheme are likely to be paying a rate of interest of just 4 per cent on their mortgage, compared with the bank's cheapest variable mortgage rate which stands at around 7 per cent.

Bank of Ireland will, however, only provide a mortgage for up to 50 per cent of the value of the property. The rest of the finance will be provided in the form of loans from the Department of the Environment and grant aid from the rural resettlement group. The scheme is designed to ensure that borrowers repayments will be broadly in line with local authority rent rates. Borrowers could typically be repaying around £100 a month on a £35,000 mortgages under the new scheme.

As is normal when advancing mortgages, the bank's security against its loans will be the property which is being financed.

Lending at this low interest rate for a fixed period will be heavily loss making" for the bank, the spokesman added, pointing to the high level of subsidy that would be necessary to continue or expand the scheme.

More than 200 families have already moved from the cities to 18 rural communities with the assistance of the resettlement body. Set up in 1990 by a sculptor, Mr Jim Connolly, the President, Mrs Robinson, is a patron of the organisation.

It is understood that a further 4,000 families are currently on the group's waiting list for resettlement.