According to Nationwide’s most recent house price index, this compares to 1.1 per cent in February and represents the seventh consecutive month that house prices continued to slow.
All regions saw a slowing in price growth in Q1, with most seeing small year-on-year falls.
West Midlands was the strongest performing region, while Scotland remained the weakest.
Robert Gardner, Nationwide's chief economist, said: “March saw a further decline in annual house price growth, with prices down 3.1 per cent compared with the same month last year.
“March also saw a further monthly price fall (-0.8 per cent) – the seventh in a row – which leaves prices 4.6 per cent below their August peak (after taking account of seasonal effects).”
Gardner said the housing market reached a “turning point” last year as a result of the financial market turbulence which followed the "mini" Budget.
“Since then, activity has remained subdued – the number of mortgages approved for house purchase remained weak at 43,500 cases in February, almost 40 per cent below the level prevailing a year ago,” he said.
The average house price in the UK now sits at £257,122, down from £257,406 in February’s HPI.
Gardner said it will be hard for the market to regain much momentum in the near term since consumer confidence remains weak and household budgets remain under pressure from high inflation.
“Housing affordability also remains stretched, where mortgage rates remain well above the lows prevailing at this point last year,” he said.
The HPI is produced quarterly with data for Q1 showing a further slowdown in annual house price growth in all regions.
It found that nine out of the 13 regions recorded annual house price declines in Q1.
Scotland remained the weakest performing region with prices down 3.1 per cent compared with a year ago, a sharp slowing from the 3.3 per cent year-on-year increase the previous quarter.
East Anglia, which was the strongest performing region last quarter, saw a significant slowdown, with prices falling 1.8 per cent year-on-year, making it the weakest performing English region.
The neighbouring South East saw a 1.5 per cent year-on-year decline, while London saw a 1.4 per cent fall.
Myron Jobson, senior personal finance analyst at Interactive Investor, said: “The latest Nationwide house price index offers the strongest indication yet that the wheels are coming off the runaway house prices in the face of rising costs.