Bank of England governor Mark Carney has promised homeowners record low interest rates will stay in place for at least another three years.
And he also said policy makers are “acutely aware” of the risk of another house price bubble and vowed to take action to rein in the property market if needed.
The new central bank boss said lenders could be asked to restrict borrowing terms or even be forced to hold more cash on their balance sheets to dampen down an overheated property market.
His warning came as he also sought to reassure interest rates were set to stay at record lows for at least three years.
In his highly-anticipated first UK public speech, at a CBI event in Nottingham, Mr Carney insisted: “Rates won’t go up until jobs and incomes are really growing.
“The knowledge that interest rates will stay low until the recovery is well established should give greater confidence to households to spend responsibly and businesses to invest wisely.”
The guidance, set out earlier this month, contained a series of caveats which have prompted fears the Bank Rate might rise sooner than expected.
However, Mr Carney said: “We do not intend even to consider raising it before unemployment falls to 7%.”
He added the Bank was ready to launch more economy-boosting measures if future rate expectations begin hindering the recovery. Mr Carney also unveiled new plans to bolster bank lending by another £90 billion.
He said all banks and building societies which meet the new capital requirements will be allowed to reduce asset holdings elsewhere on their balance sheets.
This will reduce holdings by £90 billion once all eight major banks and building societies meet the capital rules.
“That will help to underpin the supply of credit, since every pound currently held in liquid assets is a pound that could be lent to the real economy,” Mr Carney added.