The agents in Joan Meyer’s real estate office have done a lot of explaining lately to homebuyers who want to know how lower interest rates will affect mortgage payments.

Meyer, who owns Acton Real Estate, said when the Federal Reserve lowers short-term interest rates, customers often think it’s a good time to buy a home even though long-term mortgage rates aren’t necessarily affected.

Since the Federal Reserve has cut interest rates five times this year to encourage consumer spending and stave off a recession, agents in real estate offices across the country are having to deal with more people who believe it is the perfect time to buy big-ticket items like houses.

Real estate brokers often have to explain that the lower interest rates affect short-term loans – like car or credit card payments.

“Initially, when he [Federal Reserve Chairman Alan Greenspan] first lowered the rate, we got a lot more business,” said Meyer, who has owned her real estate business for more than 20 years.

“Now, I’m not sure if it’s making any difference,” she said.

The rapid reductions in rates can be overwhelming for the average homebuyer and consumer, who may find it difficult to keep track of all the changes.

The Federal Reserve recently reduced short-term interest rates to 4 percent. Rates were 6.4 percent at the beginning of the year.

Just two weeks ago, Greenspan indicated in a speech to the Economic Club of New York that other rate cuts could be needed to further boost the economy.

In contrast, average 30-year home-mortgage interest rates gradually rose in mid-May in all major metropolitan areas, according to a Bankrate.com national survey. In Boston, rates rose from 7.13 percent to 7.28 percent.

Over the last six months, interest rates for 30-year fixed mortgages have hovered in the 7 percent range, with a slight decrease in March, according to information provided by HSH Assoc., Financial Publishers in Butler, N.J.

Leaders of the National Association of Realtors predict that the average interest rate on 30-year fixed mortgages will be around 7 percent for the rest of this year.

The average rate nationally on a 30-year fixed-rate mortgage in April was 7.07 percent, down from 8.20 percent during the same month last year.

The favorable interest rates will likely keep house sales strong for the remainder of the year, NAR leaders project.

“There is a lot of confusion about interest rates,” concedes Inez E. Steele, executive president of the Realty Guild, which represents 66 independent real estate offices in Massachusetts.

Steele said people hear about interest rates for bonds, mortgages and more.

“[They] change somewhat independently of each other but are connected,” Steele said. “As to mortgage rates, they rise when there is a threat of inflation. When the Fed makes cuts, it is doing so to spur growth, which in turn can cause inflation. Hence, mortgage rates rise.”

When the Federal Reserve does cut rates, however, people start to focus on how it affects their investments and debts, including their mortgage, said Steele.

“People assess if they should refinance and/or if they can afford that house that they’ve been thinking of buying,” she said.

Consumer Confidence
Janet Pratt, owner of J.L. Pratt Realtors in Canton, said the lower rates also encourage people who’ve been thinking of selling to put their homes on the market.

Over the last few weeks, Pratt has listed additional homes. A few weeks before the rate dropped, Pratt’s office had 33 houses listed. Today her office has 43 houses on the market.

“People are becoming more willing to put their properties on the market,” said Pratt, who’s run her own real estate business since 1964. “We’re just thrilled to see them [more houses] because we had so few houses on the market.”

Pratt said buyers have also been anxious to make a deal because they fear prices will rise if they wait.

About two weeks ago, Pratt’s office had an open house for a two-bedroom Cape-style home that needed substantial work. The house drew four offers at or over the asking price of $219,000. The home was eventually sold to someone who offered about $10,000 more than the asking price, she said.

Less than two weeks ago, two buyers presented the same exact offer for a Canton home. The broker in Pratt’s office informed the buyers and one responded with a higher offer.

“We’re still getting [offers] over the asking price,” she said.

However, some Realtors believe the frenzied pace of the past few years is starting to slow down.

More customers are lowering what they’re willing to spend for a home, said Meyer, because they either feel the prices have escalated too much or they’re worried about the long-term effect of spending so much on monthly mortgage payments.

Reduced rates are a big help for many homebuyers because they can cut their overall expenses, including credit card debt, Meyer said. It could also mean they qualify to borrow more money when they are seeking mortgage approval.

In Needham, Realtor Louise Condon stills sees multiple offers and bidding wars for homes.

Condon, who owns Louise Condon Real Estate in Needham, said the lower rates boost overall consumer confidence.

“It’s the consumer confidence that is sparking our market, plus the fact that we have a good town,” she said.

In May, Condon’s agency sold a 32-year-old contemporary home with a brand new kitchen and new master-bedroom bathroom at an initial open house event, which drew about a dozen people.

Her office also recently listed a “fixer-upper” with an asking price of $539,000. On the first day the house was on the market, Condon’s office received five offers. It eventually sold that day to a buyer who offered more than the asking price.

Condon doesn’t think this type of activity is necessarily a direct result of lower interest rates.

“I don’t think that [a rate cut] has an enormous effect on our market,” said Condon, who has been a broker for 22 years.

Will the real estate market continue to be as strong in years to come? Realtors differ in their opinions.

“Everyone has to realize that real estate is a cycle,” said Pratt. “It’s like a wheel. It’s going to turn. The question is, are we at the top of the cycle or are we on the way up?”