Rocketing house prices in the north-east and elsewhere in the UK threaten economic recovery, the International Monetary Fund (IMF) warns.
It has urged the Bank of England (BoE) to take “targeted and timely” action to rein in risky mortgages.
IMF managing director Christine Lagarde called on the Bank to use powers it has been given to act as the “first line of defence” against a property bubble.
It adds to pressure on the BoE to take action just weeks before it issues its half-yearly assessment on financial stability and the risks facing the economy.
The IMF’s annual health check painted a rosy picture of the UK economy and abandoned its previous criticism of Chancellor George Osborne’s austerity policies.
But it called for a clampdown on high loan-to-income ratio home lending and Ms Lagarde said a further tightening of the market could be necessary if that failed to cool the threat of a housing bubble.
Ministers were also told to consider an early end to the UK Government’s flagship Help to Buy scheme offering mortgage guarantees and loans for those struggling to find a deposit.
Mr Osborne said he agreed with the IMF “that we need to remain vigilant for any risks that might emerge in the housing market”.
The IMF had given “unequivocal support” to the UK’s economic plan, he said, adding: “The British economy is firing on all cylinders.”
But shadow chancellor Ed Balls said: “The IMF is right to warn of the risks from an imbalanced housing market where housing demand is outstripping supply.”
Ms Lagarde called for “macro-prudential” measures – policy tools available to the Bank of England – to be used to address the financial risk.
Action should be taken “in a gradual, flexible way” to see whether it worked, she added.
Latest figures from mortgage lender Halifax showed UK house prices rose 3.9% in May, their highest month-on-month increase since 2002 and an 8.7% year-on-year rise.
According to the Registers of Scotland, north-east homeowners have seen the value of their property nearly double over the past decade.
The region is feeling the effects of Aberdeen’s housing bubble, where the average price of a home is now £202,996 – a 98.6% rise since 2004.
In Aberdeenshire, average house prices are now £218,072 – an 86.5% increase on 10 years ago and the highest in the country.
The rises in the north-east are well above the level for Scotland as a whole, where prices have increased by 36.9% in the past decade to an average of £157,476.