David Blanchflower, a member of the Bank's Monetary Policy Committee which sets interest rates, said in a speech on Tuesday that house prices could fall by 30% over the next few years if interest rates were not cut.
He added: "I am not suggesting that such a drop will necessarily occur, but it may. Cutting interest rates now may help to prevent such a dramatic fall."
A regular cheerleader for lower rates, Mr Blanchflower said "aggressive action" was needed to stop a downturn in the economy.
'Not the 90s'
The figures come the day after the Bank's own data showed that new mortgage approvals had fallen to their lowest level since records began in 1990.
We won't get prices tumbling in the absence of a major shock to the economy
This was partly owing to the difficulty for first-time buyers in finding a mortgage deal without a significant deposit.
But the fall in prices, down 1.8% over three months compared with the previous quarter, will be welcomed by some new buyers who have seen prices rocket up by 45% in the past five years.
"Prices have been rising consistently in the last four of five years, so a bit of a fall is due. It is what markets do," said Peter Rollings, managing director of Marsh and Parsons Estate Agents.
Ed Stansfield, property economist at Capital Economics, said he expected house prices to fall 20% from their peak by the end of 2009.
"With confidence faltering, the economy now slowing and no sign that the tightening in lending criteria is coming to an end, it is hard to see what will prevent further house price falls," he said.
But Peter Bolton King, chief executive of the National Association of Estate Agents, said the report needed to be put into context.
"We have been experiencing huge price leaps of double percentage points in the housing market in recent years," he said.
"Overall a 1% drop is a tiny proportion of the rise and certainly not enough to throw many people into negative equity the way we saw it in the early 1990s."
Ms Earley added that the housing market was very different to the situation in the late 1980s and early 1990s.
"The underlying conditions for most mortgage borrowers are more positive than some would suggest," she said.
The Halifax said that prices fell by 2.5% in March compared with the previous month, and the mortgage lender is set to release its figures for April in the next few days.
Ms Earley, of the Nationwide, said that the Bank of England's £50bn plan for banks to swap potentially risky mortgage debts for secure government bonds was "well thought out".
Other surveys suggested a sharp fall in prices in March
She said it would stabilise the volatile mortgage market of the past few weeks, but it would not lead to house prices and mortgage lending returning to the levels seen this time last year.
She added that, unlike the 1990s crash, more people were on fixed-rate than variable-rate mortgage deals and this helped the stability of the market.
Simon Rubinsohn, of the Royal Institution of Chartered Surveyors, said that the Bank's plan would prompt a "modest pick up in market activity" in the second half of the year. He said buyer enquiries were at levels seen in 2004-5, not the early 1990s.
The governor of the Bank of England, Mervyn King, told MPs on Tuesday that it would be a mistake to go back to where the mortgage market was a year ago, when loans were cheaper and easier to get.
Prime Minister Gordon Brown told the BBC's Today programme that the housing market was one of a number of economic issues "to deal with" along with help for pensioners and low-income families on fuel bills and petrol prices.
"Now, I think that we can come through this as a country," he said.
Vince Cable, the Liberal Democrat's deputy leader and Treasury spokesman, said substantial house price falls should be expected.
"Unfortunately it does mean that very large numbers of people who often had no choice but to take out very large mortgages at the peak of the market, they now find themselves with the problem of negative equity," he said.
This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.