Ben Bernanke, the chairman of the Federal Reserve, on Thursday called on banks to exercise extra vigilance in their mortgage lending, while expressing confidence that the US housing market was cooling in an “orderly and moderate fashion”.

Mr Bernanke said lenders needed to be careful when providing “non-traditional” mortgages such as interest-only loans and option adjustable-rate mortgages, which accounted for 30-40 per cent of approvals last year.