WASHINGTON (Reuters) - U.S. house price growth slowed sharply in March, likely as rising mortgage rates weighed on demand, data showed on Tuesday.

Prices edged up 0.1% in March after surging by an unrevised 1.2% in February, the Federal Housing Finance Agency said in its monthly report on home prices. On a year-over-year basis, prices increased 6.7% in March after advancing 7.1% in February.

Existing home sales, which account for the bulk of U.S. house sales, fell in March as the average rate on the popular 30-year fixed-rate mortgage drifted up towards 7%. But with housing inventory still well below pre-pandemic levels, house prices could remain elevated for a while. Prices increased 6.6% between the first quarter of this year and the first three months of 2023. They were up 1.1% compared to the fourth quarter.

"U.S. house prices continued to grow at a steady pace in the first quarter," said Anju Vajja, deputy Director for FHFA's Division of Research and Statistics. "Over the last six consecutive quarters, the low inventory of homes for sale continued to contribute to house price appreciation despite mortgage rates that hovered around 7%."