House prices fell by 0.5% in March, following a 0.2% drop in February, the latest Halifax house price index shows.
The annual rate of growth remains at 2.8%, unchanged from February.
Northern Ireland continues to record the strongest annual property price growth of any nation or region, rising by 6.6% in March.
Scotland recorded the second strongest house price growth, increasing to 4.3% last month, compared to 3.8% in February, while property prices in Wales were also up 3.7%.
In England, Yorkshire and Humberside also saw strong growth, up 4.2% year on year.
London saw the slowest annual house price growth, from 1.5% in February to 1.1% in March.
Amanda Bryden, head of mortgages at Halifax, said: “House prices rose in January as buyers rushed to beat the March stamp duty deadline. However, with those deals now completing, demand is returning to normal and new applications slowing. Our customers completed more house sales in March than in January and February combined, including the busiest single day on record. Following this burst of activity, house prices, which remain near record highs, unsurprisingly fell back last month.
“Looking ahead, potential buyers still face challenges from the new normal of higher borrowing costs, a limited supply of available properties to choose from, and an uncertain economic outlook.
“However, with further base rate cuts anticipated alongside positive wage growth, mortgage affordability should continue to improve gradually, and therefore we still expect a modest rise in house prices this year."
Jonathan Hopper, CEO of Garrington Property Finders, commented: “With the brief period of supercharged stamp duty-related sales over, the average pace of price rises is coasting in neutral.
“March’s slight dip in average prices is more likely to be a return to business as usual than the start of a major slide, but it does reflect two things; with buyers no longer racing to meet the Stamp Duty deadline, demand has become more measured, and the surfeit of supply in some areas is keeping a lid firmly on price rises.
“The price-sensitivity of many buyers is leading many to focus their attention on areas where value is perceived as better. This is why average prices in Scotland are rising four times faster than those in London; in Northern Ireland they’re growing six times faster than in the capital.
“In coming months, prices will be determined by how the market reacts to the conventional forces of supply and demand, and how Donald Trump’s rewriting of the global order plays out.
“With many economists predicting that the President’s tariffs will unleash a recessionary storm on the UK and much of the world, buyer demand could cool and push property prices down.
“But at the same time, that threat of recession has increased the likelihood that mortgage interest rates will fall further and faster than previously thought. With many lenders set to cut the cost of borrowing this week, and the Bank of England likely to cut the base rate up to three times this year, cheaper mortgages will allow buyers to afford more and support average prices.
“The market is at a turning point, and with so many properties coming up for sale, sellers need to price their homes carefully or risk seeing them stuck unsold on the shelf.”
Mark Eaton, chief operating officer at April Mortgages, added: “A dip in house prices was always likely, following the surge in activity earlier this year, as buyers rushed to complete before the stamp duty holiday ended. With that incentive now gone, sellers may need to show more flexibility on their asking price to secure a sale.
“The next few months will be a litmus test for the property market. With no new support measures in place and households facing rising costs on essentials like energy, water, and council tax, many buyers are understandably taking a more cautious approach - and that’s already feeding into slower activity levels.
“The Government has pledged to make housebuilding one of its top priorities over the coming years. The shortage of stock in many parts of the country is what is keeping prices high.
“The affordability factor is key to getting more first-time buyers on the property ladder and ensuring that the market does not see a considerable readjustment in prices this year. If inflation was to keep coming down and interest rates followed suit, it would provide some relief."
