Annual house price growth increased by 1.6% in March, following on from a 1.2% rise in February, Nationwide has found.

The building society’s latest house price index (HPI) revealed that the average price in the UK in March stood at £261,142.

However, it showed that across the nations, house prices dropped by 0.2% month-on-month, after an increase of 0.7% in February.

Chief economist at Nationwide, Robert Gardner, 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."

In terms of regions, Nationwide's HPI revealed that Northern Ireland saw the largest annual increase in house prices, jumping by 4.6% in the first quarter of the year, with the average house price standing at £181,303 in Q1 2024.

The North of England also recorded an increase of 4.1% year-on-year in Q1, with the average house price sitting at £158,543, after an annual decrease of 0.8% in Q4 2023.

However, the South West and East Anglia saw an annual decrease of 1.7% and 1.3% respectively, although this this an improvement on drops of 2.9% and 5.2% respectively in the previous quarter.

The average house price in London currently stands at £519,505, with a 1.6% increase in house prices in the first quarter of 2024.

Head of personal finance at Hargreaves Lansdown, Sarah Coles, added: "There’s still some buyer enthusiasm animating the market, and Zoopla figures last week showed sales up 9%. Much of the monthly fall is due to the seasonal adjustment rather than buyers driving a hard bargain.

"However, we’re still a long way from the kind of bounce sellers were hoping for in the spring. Mortgage approval levels are still around 15% lower than before the pandemic. When you consider how many new for sale signs have been going up around the country, it means sellers may still struggle to shift their properties. Zoopla figures out last week showed that the stock of properties is up by a fifth, and they’re accepting an average discount of £10,000.

"Meanwhile, mortgage rates are still rising. According to Moneyfacts, at the end of February, the average two-year rate was 5.75% and by the end of March it was 5.8%. This is hardly a spectacular ascent, but means anyone who was waiting for better rates to emerge will still be sitting on their hands. At the same time higher house prices will mean that some buyers are stuck. Even with all the enthusiasm in the world a lack of affordability is squeezing them out of the market."

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