LONDON (Reuters) -British house prices rose in August although a torrid economic outlook spells trouble for the housing market in the months ahead, mortgage lender Halifax said on Wednesday.

Prices increased by 0.4% month-on-month in August after a 0.1% dip in July, Halifax said. In annual terms, they were 11.5% higher, the lowest such rate in three months.

The survey echoed other signs that show the housing market has maintained much of its momentum despite soaring inflation. However, most analysts expect a slowdown in the coming months as the cost-of-living crunch tightens.

“House prices are unlikely to defy the economy’s wider problems indefinitely,” said Martin Beck, chief economist adviser to the EY ITEM Club consultancy.

However, he said new prime minister Liz Truss’s plan to cap household energy bills – the details of which are yet to be announced – could lower the downside risks to the market.

By reducing the prospective peak in inflation and dampening inflation expectations among the public, a cap might encourage the Bank of England to take a less hawkish approach to raising rates, with knock-on consequences for the cost of mortgages,” Beck said.

The BoE is expected to raise interest rates again next Thursday. One rate-setter said this week it was “an important question” whether the central bank opts for an 75 basis-point increase, something it has not done since 1989.

Wales saw the highest rate of annual house price growth in August, Halifax said. London again lagged other regions, despite house prices there rising by 8.8% – the fastest uptick in over six years.

(Reporting by Andy BruceEditing by William Schomberg)