Vince Cable has called for the Government's flagship help-to-buy property scheme to be reconsidered in comments likely to anger George Osborne.
The Business Secretary told Sky News there was a risk of a "new housing bubble" because of recent changes in the market.
Mr Osborne's plans were a key plank of his Budget last year but prompted fears of a price surge because they do not address property availability.
Under the first stage, an equity loan scheme allows buyers with only a 5% deposit to buy a new-build property worth up to £600,000.
In January, the scheme will be extended to include a mortgage guarantee for buyers of any home up to the same value with deposits of 5-20%.
It is due to last for three years.
Asked if it should be rethought, Mr Cable said: "We should certainly think about how it should come into effect, indeed whether it should come into effect in the light of changing market conditions.
"We don't want a new housing bubble."
He cited warnings from experts including from the Royal Institute of Chartered Surveyors this week about the "real risk" involved.
George Osborne recently hailed the change in economic fortunes "I think in many parts of the country it clearly isn't a problem. If you are in Northern Ireland or Wales or indeed the East Midlands you would wonder what all this is about," he said.
"But certainly in London and the South East, in the north east of Scotland, in other areas, there are serious housing inflationary pressures."
Despite the warning, Treasury sources confirmed the Government's commitment to the policy and its launch next year.
Government sources added there were no plans for a rethink but that Mr Cable wants the Bank of England to keep a close eye on the scheme's effects.
His comments came shortly before he had been due to warn about "complacency" over Britain's economic recovery, insisting ministers cannot "rest on our laurels".
The keynote speech in Warwick was set to be a stark contrast to an address by Mr Osborne on Monday, in which the Chancellor declared the economy was finally "turning a corner".
But Mr Cable ended up toning down his remarks while still making clear the recovery was not yet assured and further Government action was needed to address the skills shortage and boost exports.
"The kind of growth we want won't simply emerge of its own volition. In fact, I see a number of dangers. One is letting up just because we have had a few quarters of good economic data," he said.
"Recovery will not be fully established until we see strong and sustained business investment."
In a separate interview, he also stressed that he supported Mr Osborne's comments but said the economy remained in a "long, dark tunnel".
"I don't want the public debate about this to become obsessive about a few weeks' data, when what really matters is the long-term change we're trying to achieve, getting Britain more outward looking, avoiding a return to the boom-bust psychology," he said.
"The point I am trying to make is that this is a long-term haul. We have got a marathon not a sprint here."
Before Mr Cable altered his speech, shadow business secretary Chuka Umunna said he had delivered an "embarrassing slap-down" to Mr Osborne.
However, he insisted the Lib Dems could not distance themselves from the Chancellor's economic strategy.
"It also reminds everyone that you can't trust a word the Lib Dems say. Vince Cable has supported the Chancellor's policies which choked off the recovery in 2010," he said.
"Three wasted years of flatlining that has left families worse off and done long term damage to our economy is his record and he should take responsibility for it."
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