Someone who bought a property in 1965 at the age of 25 would have accumulated, on average, about £193,503 of equity in their property by the end of last year, according to Halifax, assuming they have paid off their mortgage.

However, the downturn is already taking its toll. By the end of May this year the level of equity had fallen 7% to £180,451.

About 16% of homeowners depend on the accumulated wealth in their property for their pension, according to research by Business Development Research Consultants, which provides data to FTSE 100 companies. With 18.5m owner-occupied houses in Britain, that’s 2.96m households.

The research, which surveyed more than 10,000 people, also found more than 60% of households with children struggling to set money aside, leaving their property as their only pension pot.

If you need to downsize to release capital, but are unable to sell, you could always take out a loan and put the money in a deposit account to produce an income until the housing market improves. Most lenders will only offer mortgages to people aged up to 65, which is where equity release loans come into play. These allow people in retirement to borrow against their homes without having to pay interest in their lifetimes — the interest is rolled up and sold on death (see story below).

Christopher and Shirley Lucas are typical of the downsizing generation. Lucas, 63, has just taken semi-retirement from his job as sales director of a consumer electronics firm and wants to free up some of the capital. He has put his £1.5m property in Weybridge, Surrey, on the market with Savills.

He will continue to work as a consultant and will also get a pension from his former employer, so he is not desperate for the cash, but he wants to move to somewhere smaller now that his two sons have moved out of the family home.

Lucas is hoping to use some of the money to help his sons on to the property ladder and also to spend some on travelling.

“Like many people, our house is just too big for the two of us now and we want to free up some money to do some travelling. Also there is no way our two boys, Myles, 24, and Bradley, 26, can afford to buy on their own, so we are hoping to help them.

“If we can’t sell in the current climate, we will just have to put our plans on hold and stay put,” he said.

Christopher and Shirley Lucas want to downsize to a smaller home and help their sons on to the property ladder, but may have to wait for the market to pick up

Times recommends

• Second homes: credit crunch casualty or money-spinner?
• How I built my own sliding house
• Top 10 incentives for house buyers