Britain's economy is vulnerable to a fall in demand triggered by house price imbalances, the deputy governor of the Bank of England has warned.

Mervyn King told the London School of Economics: "The immediate question is whether changes in asset prices have led to an imbalance within the economy that poses the risk of a large negative demand shock at some point in the future.

"I believe the answer is yes; but how big is that risk is extremely difficult to judge."