Banks must be put under more pressure not to "throw petrol on the fire" of the house price boom by lending people mortgages worth up to five times their salaries, Vince Cable said.
The Business Secretary said he had been "appalled" to discover the size of loans being agreed by some lenders and urged the Bank of England to use its powers to intervene.
Asked whether there should be a strict cap, the Liberal Democrat cabinet minister said: "It is crucially important that the banks don't throw petrol on the fire.
"I was appalled when I discovered that banks were lending five times. They have already reined it back on advice from the Bank of England but this is the key area that the Bank of England has got to operate in to make sure that this boom in house prices, particularly in the south of England, doesn't destabilise the whole of the economy.
"It is their responsibility."
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