I am glad you want to let the agent know if you are moving on. The agent can stop doing any more work knowing that you are not going to be working with him.
Since you did not sign anything, you do not have a contract, or a buyer's agency agreement, so there is nothing to terminate. If you have found an agent that will take better care of you, my favorite phrase is "this is just not working out.".
By the way, you should have a signed buyers agency agreement with your Realtor. With one of those agreements, the Realtor works for you. Without one, the Realtor works for the seller. On my Team, the buyer's agency agreement can be terminated at any time before you buy without any cost. You might want to look for that, since you have changed Realtors once, and may be concerned about the ability to change again. We agree to that provision because we only want to work with people who want to work with us, and we do not need to have people stuck with written agreements that they do not like.
That is great that your friend has found an agent that they are comfortable with. As you have learned from this experience is that all agents are not the same. The best thing to do is interview several agents (including your friends agent) and explain your situation and ask them about their experience and experience in this market and knowledge that is helpful for a 1st time buyer. Things are changing almost on a daily basis and it is very important for 1st time buyers to have a buyers agent with a number of years (prefer 15+ so they have seen swings in the market) experience not only in real estate but in the local Raleigh area market. Real estate is very local and Raleigh is no exception.
I have been a national trainer and speaker for the past 10 years and a top agent in the Raleigh market for 17. If I can answer any questions for you or recommend a good agent to work with please feel free to contact me through Trulia.
If you are under a buyer agency agreement...you need to consult with an attorney or call the real estate commission for advice. As Realtors/licensed agents we are not allowed to "offer" suggestions to break contractual agreements.
Good luck and just be open with your current agent. They are working for you and maybe they just aren't seeing the big picture and how you're feeling about it!
I always tell buyers that I'm working with - PLEASE let me know if there's something I am NOT doing, something that you think i SHOULD be doing...if you don't tell me, I don't know.
And I also add that "you are the one hiring me to do a job for you". If "you are not satisfied, (and hopefully you've communicated that to me) you can fire me at any time".
If you are unhappy with your agent, please let them know why.
Assuming you haven't signed an actual Buyer's Agency agreement, then call your friends' agent and feel them out. Discuss what your concerns have been, and see what they say. It is possible after all that what works well for your friends won't work well for you.
After that, if you think you still want to switch, then the considerate thing to do is have an actual conversation (phone or in person) with your current agent. Express your concerns, listen to their answers, and go from there.
In particular, ask your current agent why they seem to only be suggesting homes outside your price range. It's possible homes like you seek are quite negotiable now and you can get a deal. If a Buyer tells me they can afford $150,000 then I would be remis if I didn't consider homes over $150,000 at all, and especially if folks are negotiating as far as from $165,000 for example. Also, it's possible that to get what you say you really need, homes cost more. Your agent should be much more fothcoming about this issue if that's the case, rather than some roundabout "hey, you need to spend more/adjust your expectations".
So, in summary - the tactful way is to show respect for whatever work they have done via an actual conversation communicating your concerns and decision.