UK house prices unexpectedly increased by 0.8% between February and March 2023, according to data from Halifax released on Thursday.

This surpassed economists’ predictions of a 0.3% contraction. Property prices were 1.6% higher than in March 2022, which is a drop from the 2.1% expansion registered in February and the weakest rate since October 2019.

Kim Kinnaird, director at Halifax Mortgages, attributed the rise to an easing of mortgage rates and the reversal of a sharp increase in borrowing costs from November 2022. She added that the labour market, which is “a key indicator for house prices”, remained strong, with unemployment close to an all-time low.

This contrasts with data from Nationwide, another mortgage provider, which recorded a 3.1% annual rate fall in March, the steepest drop since 2009.

Both Nationwide and Halifax compile their UK house price indices based on the mortgages they approve for customers who may not be representative of the wider population. Low volumes of mortgage approvals add to the volatility of the data.

In February, mortgage approvals were 37% down year on year, according to separate data from the Bank of England.

House prices peaked in August last year, according to Nationwide and Halifax, which estimates that the average UK property costs £287,880. This is down from a high of £294,000 registered last summer. The property market has benefited from unexpected resilience in the wider economy, supported by falling energy costs.

However, affordability is stretched as mortgage rates are still higher than in the past decade, and property prices have yet to return to their level before the pandemic-related “housing boom”, which was boosted by low interest rates. Halifax’s estimate of the average house price is 20% higher compared with February 2020, before the first Covid-19 restrictions, more than double the increase between 2017 and 2020.

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