The Bank of England has cautioned homebuyers to take care on debt and warned that the trend of soaring property prices is "unsustainable".

Giving evidence to the Commons Treasury select committee, the Bank's governor, Sir Edward George, told MPs that there would be "no option" but to raise interest rates if the housing market threatened to drive up inflation.

"We have got to be clear that if consumer growth continues at its recent rate, driven in part by house prices, we would have to act to moderate that. I think that is as a clear signal as I can give," he said.

Sir Edward's deputy, David Clementi, told homebuyers to "exercise caution" and forecasted that longer the property boom continued "the sharper is likely to be the final adjustment".

The bank is also set to give its own verdict on the Treasury's five economic tests for the euro.