Britain's looming EU referendum and soaring house prices threaten the economic recovery, the International Monetary Fund has warned.
Christine Lagarde, the IMF's managing director, said there would be no winners if Britain voted to leave the European Union.
"My hunch ... is that it is bound to be a negative on all fronts," Ms Lagarde told CNN. "For those that stay, because there are fewer of them, and for those who go, because they lose the benefit of [that] facilitation of exchange."
The IMF noted in its annual UK health check that further uncertainty over Britain's future in the EU could "weigh on investment". Ms Lagarde said the negative effects were already being felt.
"Uncertainty is bad in and of itself," she said. "No economic player likes uncertainty. They don't invest, they don't hire, they don't make decisions in times of uncertainty."
High levels of household debt combined with rapid house price growth were also one of three big risks the UK faced, alongside the June 23 referendum and weak productivity.
The IMF said house price growth was fast outpacing wages in some parts of the country. This could lead to families taking on more debt, leaving them vulnerable to house price shocks.
"High house prices result in some households taking on high leverage, posing financial stability risks," it warned.
"Significant pressures" driven by a lack of supply had already pushed the price-to-income ratio above its pre-crash high in London and back towards its peak in the rest of the UK.
The IMF also warned that the growing buy-to-let market threatened Britain's recovery and urged the Chancellor to hand the Bank of England more powers to rein-in the sector.
The IMF also urged George Osborne to:
- Phase out the “triple-lock” for pensions - which guarantees that state pensions rise by at least 2.5pc a year - to fund infrastructure spending.
- Relax austerity in the event of a slowdown, as it warned that risks to UK growth were "somewhat tilted to the downside".
- Maintain an "intrusive and conservative approach" to bank regulation to ensure lenders are resilient to shocks.
The Bank of England has already taken steps to prevent the housing market from overheating by limiting the proportion of loans that exceed 4.5 times a borrower's income.
Lenders are also required to stress test the ability of borrowers to repay their mortgage in the event of interest rates jumping by 3 percentage points.
While this has helped to cool the market, the IMF repeated a warning issued in December that a lack of supply had driven continued growth in prices.
It said more action to take the air out of the property market could be warranted if the reduction in high loan-to-income mortgages started to reverse.
"Despite recent declines, the percentage of new mortgages at high loan-to-income ratios remains well above pre-boom levels [in 2000], as does the aggregate household debt-to-income ratio, which has stopped declining and is higher than in most other G7 countries," the IMF said.
"Such high leverage significantly exposes households and banks to interest-rate, income, and house-price shocks".
The IMF said that curbs on the buy-to-let market, which has accounted for about one-third of gross mortgage growth since 2012, could be warranted.
"Assessed against relevant affordability metrics, buy-to-let borrowers appear more vulnerable to an unexpected rise in interest rates or a fall in income," said Stephen Field, the IMF's executive director for the UK.
Mr Field said curbs on mortgage interest relief for landlords and the upcoming stamp duty “surcharge” on buy-to-let properties and second homes from April would dampen demand in the short term.
However, he added: "Over time some of this may be offset by increased demand from existing and potential owner-occupiers."
The IMF currently expects the UK economy to grow by 2.2pc this year and in 2017, unchanged from its last forecast in January.