The International Monetary Fund has warned the UK it could be facing a dangerous house price bubble.
The IMF said the UK's economic prospects were generally good.
But it singled out spiralling property prices - and the possibility of a deflationary crash - as an "appreciable" risk.
The IMF's assessment came as the UK's biggest mortgage lender, Halifax, reported a 23% increase in property prices over the past 12 months.
The Halifax figures, released earlier on Monday, fly in the face of recent research suggesting the housing market may be cooling.
Halifax said demand remained strong and prices went up by 1.7% in February.
The Bank of England was careful to avoid fuelling a property boom by holding off from cutting interest rates for more than a year.
But it caved in last month and cut rates by a quarter of one percentage point, after pressure from industry and worries about the world economy.
Ready to respond?
Most IMF directors endorsed the Bank of England's decision to lower interest rates in February.
But the international lender said monetary policy must now balance supporting domestic demand against the risk of a housing bubble.
"It was agreed that, going forward, the authorities should stand ready to respond swiftly to the changing balance of risks," the IMF said.
Among those risks are that domestic demand is being buoyed by increasingly high levels of household debt, fueled by soaring house prices and low interest rates.
"Directors therefore called for heightened vigilance to these risks by the authorities, especially regarding the possible existence of a housing price bubble with its potential deflationary consequences," the IMF said in a statement.
In its annual assessment of the UK economy, the IMF predicted growth of 2.2% this year, compared to Chancellor Gordon Brown's revised forecast of 2.5%.
And it said inflation would reach 2.6%, from its current level of 2.2%, and unemployment would edge slightly higher.
"Directors noted the prospects for continued economic recovery, but they saw appreciable risks to this outlook stemming from both external and domestic uncertainties," the IMF report said.
Earlier, Halifax chief economist Martin Ellis said the UK housing market "remains strong".
But, he added: "There is increasingly a north/south divide with London and the South East becoming more a buyer's market, while the North remains very much a seller's market."
The company said low interest rates, low unemployment and the "affordability" of property, were continuing to drive prices.
New house building - and the number of second-hand of properties coming on to the market - remained at an historically low level, it said, adding further to pressure on prices.