The FHA yesterday cut its interest rate on home loans by half a percentage point to 12 percent.

The interest rate has dropped from a high of 17 1/2 percent a year ago, touching off a "surge" of home buyers into the market in the past two months, according to delighted real estate brokers. The last cut came a month ago, when the rate was reduced from 13 1/2 to 12 1/2 percent. Yesterday's drop will bring out still more buyers who have been waiting for interest rates to decline, real estate dealers believe.

Steed Mortgage Co. of Wheaton said that its volume of loans has tripled during the past month, and most lenders are reporting similar increases, according to the Mortgage Bankers Association. Interest rates on conventional loans are likely to go to 13 or 13 1/2 percent, according to the association.

"Consumers are becoming believers that the interest rates are not going lower. There is a tremendous amount of refinancing," said Mark J. Riedy, executive vice president of the bankers group.

"The bad news is that the FHA is getting caught up in processing delays with the sheer volume" of paperwork, Riedy said. "Thousands of homebuyers" have sought FHA financing or refinancing in recent months, causing a "tremendous workload."