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The head of the International Monetary Fund has called on the UK to remain within the EU, in her first public comments on the possibility of a Brexit.

In what she stressed was a personal view, Christine Lagarde, IMF managing director, told a press conference in London that she “very, very much hoped that the UK stays in the European Union”.

Uncertainty caused by the government’s plans to hold an in-out referendum on membership was highlighted by the IMF as one of the main risks that clouded an otherwise upbeat assessment of the economic outlook.

Ms Lagarde said a “solid assessment” on the risks of Brexit would form a big part of the IMF’s next evaluation of the state of the UK economy, which is due in May, but she added: “Certainty is always better than uncertainty.”

Overall the fund struck an optimistic tone. It concluded that “steady growth looks likely to continue over the next few years” and is expected to average 2.25 per cent annually in the medium term.

George Osborne said it was the strongest IMF assessment of the British economy in his time as chancellor and “frankly, could hardly be more positive”.

Following the chancellor’s decision to smooth the path of deficit reduction in the Autumn Statement and to rely more on tax rises rather than spending cuts to close the deficit, the IMF — which in 2013 publicly clashed with the chancellor over the speed of his deficit reduction plans — said it now judged the “planned pace of deficit reduction is appropriate”.

The IMF takes sides

The International Monetary Fund this week made what may seem like a small technical change to its lending policies.

A decision to drop the prohibition of financial aid to countries that are behind on their debts to other governments had been in the works for some time.

Meanwhile Rupert Harrison, Mr Osborne’s former chief of staff, has warned that complacency about the economic recovery could endanger Britain’s stability in the future.

Writing in the Financial Times, Mr Harrison admits Mr Osborne is finding it “harder to maintain support for difficult decisions” on public spending and that the pace of public sector reform could dwindle as the recovery takes hold.

He says the public may object if the Bank of England starts to prevent them from taking out mortgages in the interests of financial stability, and warns that excessive risk-taking by banks could return. “The banks will not be content to be boring for long,” he said.

Mr Harrison, now a strategist at BlackRock, one of the world’s largest fund managers, said: “As the recovery continues, policy- makers will find it ever harder to maintain the right amount of paranoia.”

The IMF pointed to rapidly increasing house prices and the UK’s twin current account and fiscal deficits as the biggest risks to economic recovery.

It said that despite robust economic growth, household debt-to-income ratios were at elevated levels, leaving some households vulnerable if there was a sudden change in incomes or interest rates.

More macroprudential restrictions on lending — such as tighter limits on loan-to-income ratios or loan-to-value caps — “might be needed if shares of high leverage mortgages do not continue to fall”, it concluded.

While house price acceleration in the UK has slowed recently, prices are still rising far more quickly than incomes.

Despite the BoE’s Financial Policy Committee decision this month not to act to curb lending in the unsecured personal loans and buy-to-let mortgage markets — though it dropped hints beforehand it was prepared to act to rein in credit growth — these areas are of increasing concern to policymakers.

Buy-to-let mortgages have surged in popularity among the baby boomer generation in recent years. The concern is that a combination of interest rate rises, price falls and a loss of confidence could push a substantial number towards the exit at once.

The IMF also calls for greater progress to be made on consolidating data on households’ debts so that regulations can shift away from loan-to-income limits to debt-to-income limits as these are “more comprehensive and more difficult to evade”.

Mr Osborne added that the government was already addressing the challenges “rightly identified” by the IMF.

Among the key measures in the Autumn Statement was a new higher rate of stamp duty tax payable by new buy-to-let landlords.

Additional reporting by Chris Giles