I was hoping to free up some capital. Should I put my house on the market as soon as possible?

Ed Stansfield of consultancy Capital Economics thinks prices will fall by 20% by the end of next year, before slowly recovering. He recommends selling your house sooner rather than later if you need the money within that time.

He said: “If you plan to use the equity in your property, you would be better off acting now or be prepared for the long haul and wait until prices recover.”

Capital Economics is a notable bear, however, and has been proved wrong in the past. Even normally bullish commentators still recommend acting sooner rather than later, though. Martin Gahbauer, senior economist at Nationwide said: “There is a tremendous amount of uncertainty at the moment. If you are already thinking of downsizing it would be better to do it sooner rather than later.”

He adds: “It is conceivable that it could take a number of years before prices recover to the level they were at in October 2007.”

What if I can’t sell? Can I raise money on my home?

Under current market conditions, some sellers have had to reduce their asking price by 15% or more in the past few months, according to estate agents.

If you want to stay put and raise money by borrowing instead, lenders will generally allow you to borrow even beyond retirement age, as long as you can demonstrate that you can make the repayments.

If you can’t afford the repayments, however, equity release might be an option.

How does equity release work?

With equity release, you can borrow up to 35% of the value of your property and there are no monthly repayments. The interest is rolled up and repaid out of your estate on death.

The exact amount you can take out depends on your age. Most lenders set a minimum of 60, but a handful, including Prudential, will start younger.

The Pru will lend 10% of your property’s value at 55, rising by 1% a year to a 35% maximum. You can take the cash in one lump sum, or draw it in stages when you need it.

Rates, which range from 6.3% to 6.87% and are fixed, used to be considered uncompetitive but, thanks to the soaring cost of standard mortgages, now look better value.

There are inheritance-tax perks, too. Releasing the equity could take your home below the IHT threshold of £312,000. If you do not need the cash, you could give it to your children and it would be tax free as long as you lived for another seven years.

What’s the catch?

The longer you live, the more your heirs will have to repay out of your estate.

Suppose your home is worth £500,000 and you release 10% at 55 — or £50,000. Interest would be 6.4%.

If you lived until 80, the debt would grow to £246,601. If house prices had increased by 4% a year in that time, your property would be worth £1.33m — so your heirs would have to pay about 18.5% of the property back to the lender.

Most schemes have negative equity guarantees to ensure the debt cannot be worth more than the value of the property.

I was relying on property but now I think I might need to start a pension. Is it too late?

A 35-year-old saving £300 gross a month into a pension would have £290,600 at 65, assuming growth of 6%. A 40-year-old making the same monthly saving will only achieve £202,000 at 65.

For the same pension pot the 40-year-old would have to pay in £430 gross a month.

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