Sept. 28 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the odds on the first U.S. recession in six years have increased as falling house prices threaten consumer spending.

``The danger of recession has obviously risen,'' said Greenspan, who will meet U.K. Prime Minister Gordon Brown in London this weekend, in an interview on BBC Radio 4 today. Greenspan said the chance of recession was ``less than 50-50,'' repeating a comment made Sept. 23.

The Fed lowered its benchmark interest rate by half a percentage point to 4.75 percent this month in a bid to prevent a housing slump from spreading through the economy. Sales of new homes dropped 8.3 percent in August and prices plunged by the most since 1970, the Commerce Department said yesterday.

Greenspan ``is right in pointing to the risks of a U.S. recession,'' said Matthew Sharratt, an economist at Bank of America Corp. ``The clear risk that consumption may soften is a worry for the U.S.''

Former Treasury Secretary Lawrence Summers said in an interview yesterday that there is nearly an even chance of a recession, which is defined as two consecutive quarters of economic contraction. Greenspan in March put the odds on a recession at one in three.

Wealth Effect

The Fed, which Greenspan left in January 2006, lowered interest rates after rising defaults on U.S. subprime mortgages sparked a global credit crunch. Greenspan said today that the effects of a housing slump in the U.K., where prices have tripled in the past decade, would be very similar to what is happening in the U.S.

``Both of our economies have consumer markets in part driven by the wealth effect,'' he said in the radio interview. ``The wealth effect would be significantly reduced and consumption expenditures would ease.''

Still, Greenspan said he isn't certain that the U.S. or U.K. economies will contract.

``I'm not forecasting that we're about to get a significant recession in the U.S. or the U.K.,'' Greenspan said. ``All you can basically know is whether the probabilities are increasing or decreasing.''

Greenspan, who is on a visit to the U.K. to promote his book, ``The Age of Turbulence,'' said he has kept up contact with Brown by e-mail in his position as an unpaid adviser to the British premier.

To contact the reporters on this story: Jennifer Ryan in London at Jryan13@bloomberg.net; Brian Swint in London at bswint@bloomberg.net.

Last Updated: September 28, 2007 06:34 EDT