Bank of England Governor Mark Carney has since called the housing market the greatest domestic risk at present to Britain's financial stability.
IMF managing director Christine Lagarde will present the Fund's annual assessment of Britain's economy later on Friday, and in a BBC radio interview, Osborne said she too was looking closely at Britain's property market.
"I agree with Christine Lagarde that we need to be alert to the build-up of debt in the housing market. We need to be alert when we see house prices rising," Osborne said.
Read MoreUK housing boom cools amid 'mortgage prison' fears
"I have given the Bank of England tools to do the job, and they should not hesitate to use those tools if they see these developments turning into a risk to the British economy."
The BoE's Financial Policy Committee will publish its half-yearly stability report later this month. It may take further steps to require lenders to set aside more capital against certain types of home loans, and to assess borrowers' ability to repay mortgages more stringently.
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