Despite the rise, the annual rate of property price inflation fell to 7% from 7.9%, and the Nationwide said the overall trend remained "broadly flat".

"The trend continues to confirm our view of a gentle slowing in the market," the society said.

But an economic forecast group said the market was at an "impasse" with buyers and sellers unable to agree on prices.

Volatility

March's 0.6% fall in property values was the steepest monthly fall the Nationwide had seen for nearly 10 years.

However, just a few days after the Nationwide released its survey, the Halifax reported a 0.5% rise in March prices.

"Volatility in monthly house price changes is not unusual in the spring," said Nationwide's group economist Fionnuala Earley.

However, she added that the latest figures indicated that the market was still cooling.

"Monthly house price inflation over the last three months has averaged 0.3% compared with 2% per month over the same three-month period a year earlier."

Separately, economic forecast group Capital Economics said in a statement that the housing market had "softened" during the past three months.

Nationwide expects to see sales pick up over the coming year

Capital Economics added that fewer properties were being sold as "buyers are no longer willing or able, to meet asking prices and sellers are reluctant to lower their expectations."

Capital Economics warned that lower house prices are likely in future.

Repossessions

House price inflation has moderated in response to five increases in UK interest rates since late 2003.

Official figures suggest that some UK homeowners are struggling to cope with rising rates.

According to the Department for Constitutional Affairs, the number of property repossession orders rose by 25% in the first three months of 2005, against the same period in 2004.

Property repossession orders are usually granted by the courts, following an application from a mortgage lender hoping to recover arrears.