UK house prices declined unexpectedly in March as higher interest rates continue to damp affordability, data published by the Nationwide Building Society revealed Tuesday.

The house price index posted a monthly fall of 0.2 percent in March, in contrast to the 0.7 percent rise in February and confounding the forecast of 0.3 percent gain.

House prices dropped for the first time in three months.

However, on a yearly basis, house price inflation advanced to 1.6 percent from 1.2 percent a month ago.

Nationwide Chief Economist Robert Gardner said mortgage approvals was about 15 percent below pre-pandemic levels, largely reflecting the impact of higher interest rates on affordability.

However, consumer sentiment is improving amid easing cost-of-living pressures, Gardner observed. There were reports of pickup in new buyer enquiries and new instructions to sell in recent months.

Housing affordability is improving, albeit gradually with income growth continuing to outpace house price growth by a healthy margin, he noted.

“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,” said Gardner.

Data today showed that house prices increased 1.1 percent in the first quarter from the previous three months.