The average property price now stands at £299,677, while annual growth slowed to 0.8%, down from 1.2% the previous month.
Halifax said regional price growth remained uneven, with northern areas continuing to outperform southern markets.
Northern Ireland recorded the strongest annual growth in the UK, with average prices rising by 8.7% to £224,809. Scotland also saw strong annual growth of 4.4%, taking the average property value to £222,716, while prices in Wales increased by 1.6% to £230,909.
In England, the North East posted annual growth of 5%, with average prices reaching £184,119. The North West recorded growth of 3.1%, taking the average home price to £247,442.
By contrast, southern markets continued to weaken. In the South East, prices fell by 1.9% year on year to £383,573, while in London they declined by 1.2% to £536,751.
Amanda Bryden, head of mortgages at Halifax, said: "House prices fell -0.5% in March, following the modest +0.3 per cent increase seen in February. As a result, the average property price is now £299,677. The pace of annual growth has also eased, slowing to +0.8 per cent from +1.2 per cent the previous month, suggesting the market has lost some momentum as spring begins.
“The recent slowdown in the housing market reflects the wide uncertainty regarding the conflict in the Middle East. Concerns about higher energy prices have pushed up inflation expectations, which in turn led to a rise in mortgage rates, reducing confidence that interest rates will be cut this year and dampening the initial momentum in the market seen at the start of the year.
“The effect on house prices will largely depend on how long-lasting these pressures prove to be and the wider implications for the economy and unemployment. Mortgage rates are a key factor for buyers, particularly those getting on the ladder for the first time, who are already balancing the challenge of saving a deposit, with the cost of borrowing. As a result, many are likely to watch movements in mortgage rates closely, before making a decision on any home purchase. In this environment, professional advice can play an important role in helping people understand their options and make informed decisions that are right for their individual circumstances.
“However, the recent increase in UK mortgage rates has been more modest than the sharp rises seen during the mini budget of 2022. Further, many households will already be on fixed deals, protecting them from the latest rate rises. Taking all this into account, house prices may prove resilient, even if uncertainty weighs on market activity in the near term."
Nathan Emerson, chief executive at Propertymark, said: "We are at an important intersection where we must clearly acknowledge future challenges ahead. We started the year with positivity in terms of seeing an uplift in the average number of viewings per available property, coupled with general consumer positivity regarding affordability.
“However, a lot has changed in a short space of time, with numerous sub 4% mortgage deals being withdrawn over the last few weeks as the wider economy adjusts to potential uncertainties.
“Inflation is expected to increase over the coming months and this is likely to have an immediate effect on consumer affordability. The rate of inflation will also play intense influence on the Bank of England regarding base rate decisions over the forthcoming months too. In addition, we are also due to see OFGEM make their next decision regarding energy price caps late next month, which again should be highly considered regarding household affordability as the year plays out.”
Ryan Etchells, chief commercial officer at Together, said: "The mortgage market’s sudden about-turn in March has definitely rattled would-be buyers, and it’s starting to push house prices down as a result.
“Right now, with so much uncertainty around, the property market is likely to stay relatively subdued. That said, once inflation starts to come back down, we might begin to see things returning to normal.
“Buyers pressing ahead with property plans despite the recent market dip should consider working with a specialist lender who can assess their needs on an individual basis and offer more flexible finance based on a case-by-case approach.”
Tom Bill, head of UK residential research at Knight Frank, said: "What goes up must come down, but for mortgage rates the drop will be more gradual than the sharp increase triggered by the Middle East conflict, even if the two-week ceasefire deal holds. Sentiment in the housing market will improve if the war stops, but its longer-term inflationary impact and weaker demand for UK government debt due its tight financial headroom and apparent inability to cut spending means mortgage rates won’t snap back to where they were in February. This will keep demand and house prices in check this year."
