House prices were up 1.6% in March from a year earlier, picking up from annual growth of 1.2% in February, although the climb was smaller than the average 2.4% forecast of economist in a Reuters poll.

Prices fell 0.2% in March alone, the first drop since December 2023 after a 0.7% increase a month earlier, bucking economists' expectations in a Reuters poll for a 0.3% rise on a seasonally adjusted basis.

"Activity has picked up from the weak levels prevailing towards the end of 2023 but remain relatively subdued by historic standards," Nationwide economist Robert Gardner said.

British house prices jumped more than 20% between the start of the COVID-19 pandemic and late 2022, but then fell slightly as home sales were curbed by bond market turmoil during Liz Truss' brief premiership and a sharp rise in interest rates.

Mortgage approvals in January were 15% lower than before the COVID-19 pandemic, reflecting the impact of higher rates.

With house prices rising more slowly than wages - which are up around 6% from a year ago - affordability constraints are gradually easing, Gardner said.

The Bank of England increased its main interest rate to 5.25% in August 2023, its highest since 2008. Financial markets see a first cut in June or August, with rates forecast to drop to around 4.5% by the end of the year.

Across the first quarter as a whole, house prices were 1.1% higher than the previous quarter, the fastest three-month rise since the three months to July 2022, Nationwide said.

Over the past year, the biggest price rise was in Northern Ireland, where they rose 4.6%, while the largest fall was in southwest England where prices fell 1.7%. Prices in London increased by 1.6%.

Rob Wood, chief UK economist at consultancy Pantheon Macroeconomics, predicted a 4% rise in house prices for 2024.

"Forward-looking indicators continue to suggest house prices will keep rising as mortgage rates gradually tick down," he said.