Nationwide has reported that UK house prices fell by 0.2% in March, after taking account of seasonal effects.

However, the annual rate of house price growth edged higher to 1.6% in March, from 1.2% in February.

Robert Gardner, Nationwide’s chief economist, said: “Activity has picked up from the weak levels prevailing towards the end of 2023 but remains relatively subdued by historic standards. For example, the number of mortgages approved for house purchase in January was around 15% below pre-pandemic levels. This largely reflects the impact of higher interest rates on affordability. While mortgage rates are below the peaks seen in mid-2023, they remain well above the lows prevailing in the wake of the pandemic.

“With cost-of-living pressures easing as inflation moves back towards target, consumer sentiment is improving. Indeed, surveyors report a pickup in new buyer enquiries and new instructions to sell in recent months. Moreover, with income growth continuing to outpace house price growth by a healthy margin, housing affordability is improving, albeit gradually.

“If these trends are maintained, activity is likely to gain momentum, though the pace of the recovery is still likely to be heavily influenced by the trajectory of interest rates.”

David Hollingworth, associate director, communications at L&C Mortgages, added: “Nationwide’s figures show a monthly drop in prices but the positive annual growth demonstrates some signs of renewed activity in the market, despite what could be seen as a mixed picture for house prices.

“Interest rates have understandably been at the heart of the subdued housing market in the face of periods of extreme volatility and higher cost of living. Mortgage rates have dropped substantially, and the lowest five-year fixed rates now sit around 1 percentage point lower than last summer.

“Borrowers are readjusting their expectation from the ultra-lows of the last decade. As the rate of inflation continues to fall and the likelihood of a cut in base rate gathers momentum, there should be a continued, gentle boost to confidence that will see activity continue to pick up and make for an improved market as the year progresses.”