Action must be taken to stop the “housing boom” in parts of the UK getting “out of control”, according to Business Secretary Vince Cable.
He said he was “appalled” that some banks had been lending five times a mortgage applicant’s income, suggesting a “stable level” was up to 3.5 times.
The desires of potential homeowners should be balanced against the stability of the economy, he added.
His comments come ahead of a major speech from the chancellor.
George Osborne, in his Mansion House speech, is expected to say how the Bank of England could tackle any financial instability caused by house price rises.