LONDON (Reuters) - British house prices rose in February at the weakest rate in six-and-a-half years, dragged down by the biggest slump in London for a decade as Brexit uncertainty sent chills through the market.
Official data on Wednesday also showed consumer price inflation unexpectedly held just below the Bank of England's 2 percent target in March, offering some relief to consumers whose spending has helped Britain's economy through the Brexit crisis.
British house prices stood 0.6 percent higher in February than a year ago, slowing sharply from a 1.7 percent annual rise in January, the Office for National Statistics said.
In London, house prices plunged by 3.8 percent on the year -- the biggest drop since mid-2009. The malaise in the capital spread to the south-east of England, where prices fell for the first time since 2011.
Other surveys have shown Brexit to be a major drag on the property market in the capital, which is sensitive to flows of migrant workers from the European Union. A surge in prices in London in previous years has also stretched affordability.
Separately, the ONS said consumer prices rose at an annual rate of 1.9 percent in March, the same rate as in February. A Reuters poll of economists had pointed to 2.0 percent.
"Inflation is stable, with motor fuel prices rising between February and March this year, offset by falls in food prices as well as the cost of computer games growing more slowly than it did this time last year," ONS statistician Mike Hardie said.
The recent weakening of inflation, combined with the lowest unemployment rate in 44 years and rising wages, has taken the edge off the uncertainty about Brexit.
Britain's modest inflation rate is also helping the Bank of England to hold off on fresh interest rate hikes while it waits for the outcome of Britain's Brexit impasse.
BoE policymakers have said they want to see firm evidence of domestic inflation pressure building before they vote to raise rates.
(Reporting by Andy Bruce and William Schomberg)