David Blanchflower last night highlighted deepening divisions on the Bank of England's Monetary Policy Committee by warning the UK was likely to tumble into recession if greater cuts in interest rates did not come soon.

He told the David Hume Institute in Edinburgh that he was "particularly concerned" that the UK "exhibits broad similarities to the US experience".

The US has been driven into, or at the very least to the brink of, recession by a housing market slump stemming from massive default on sub-prime mortgages in America.

UK residential property values have shown more modest falls but Blanchflower, who noted the 2.5% drop reported by Halifax for March was the biggest monthly decline since 1992, claimed last night that UK house prices could fall by about a third over "two or three years" without more aggressive action on rates.

Blanchflower, speaking only hours after Bank of England Governor Mervyn King reiterated inflation concerns and signalled he was in no rush for the nine-strong MPC to cut rates further, said: "We are probably in the grip of world forces that are greater than most people realise. Forecasting is thus very difficult at such times. I believe more action is needed to prevent the UK falling into recession...

"Monetary policy in my view still remains restrictive currently, and we need to take action to loosen policy sooner rather than later."

He added: "We need to look through the short-run hiccups in inflation that will occur over the next few months. Our main priority now is to ensure we conduct monetary policy in such a way that the UK doesn't slip into recession, causing us to significantly undershoot the inflation target. It isn't too late."

Blanchflower, who has consistently been the most dovish MPC member and voted for a half-point cut when rates were reduced from 5.25% to 5% earlier this month, said "the downbeat news from the (UK) housing sector now seems to have started to spread to the consumer".

Detailing similarities he sees between the UK and US, he said: "For some time now I have been gloomy about prospects in the United States, which now seems clearly to be in recession. I believe there are a number of similarities ... which suggest that in the UK we are also going to see a substantial decline in growth, a pick-up in unemployment, little if any growth in real wages, declining consumption growth driven primarily by significant declines in house prices. The credit crunch is starting to hit and hit hard."