The Bank of England will keep a close eye on the rising cost of houses in the country and says it can choose from a range of policy tools to employ if a price surge posed a risk to the financial system.
A number of recent housing indexes have suggested that prices are approaching pre-crisis highs, with London showing a particular resurgence. Nationwide confirmed in August that an average home was now worth £170,825 ($260,098), the highest since June 2008 when the average was £172,415. Meanwhile, property website Rightmove has predicted that prices are set to increase by 6 percent this year, from an initial estimate of 2 percent at the start of the year.
The figures have given rise to fears that a housing bubble is brewing.
(Read More: UK housing recovery spurs 'bubble' warnings)
"The committee would be vigilant to potential emerging vulnerabilities," the Bank said in a statement on Wednesday morning, after a meeting by the Financial Policy Committee.
The central bank noted that mortgage approvals in July were 30 percent higher than a year earlier. Average house prices in August were 5 percent higher and had risen even more in some parts of the country, particularly London.
It said that activity in the housing market and loan-to-value ratios on new mortgage lending were still below historical averages, but added that that wouldn't stop it from closely monitoring developments in the housing market and banks' underwriting standards.
"The committee noted that if risks to the stability of the financial system were to emerge from the housing market, both it and the microprudential regulators had a range of tools available to address those risks," it said. It could give guidance on underwriting standards, capital requirements and recommendations on affordability tests.