On a quarterly basis, prices were up 2.8 per cent, well behind the 4.2 per cent growth experienced in the first three months of 2006.
Despite annual house price inflation rising to 11.1 per cent, Halifax predicts the figure "should settle" in the coming months due to the market's "subdued" conditions.
"Prices continue to rise in a tight market but there are emerging signs that pressure on householders' finances - partly due to the rise in interest rates since last summer - is dampening housing demand with evidence of reduced market activity," commented group economist Tim Crawford.
"We expect the recent rises in interest rates, negative real earnings growth and above inflation council tax bill increases to lead to slower house price growth over the coming months. Sound economic fundamentals and an ongoing shortage of housing supply will, however, continue to support house prices."
Prices increased in all British regions in March, Halifax says, with the largest rises experienced in Scotland (7.5 per cent) and the south-west (5.4 per cent).
In comparison, properties in the East Midlands and Yorkshire and the Humber went up by 0.2 per cent and 0.6 per cent respectively.
In Northern Ireland meanwhile, the average house price broke the £200,000 barrier during the last quarter, meaning only London, the south-east and the south-west have higher average house prices.
Two years ago Scotland was the only British region with a lower average property price than Northern Ireland.
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