According to new research from mortgage provider Castle Trust, around 3.25m households – 13% of working adults – plan to downsize their home to help fund all or part of their retirement.

On average they hope to buy a house 36% cheaper – equivalent to £57,400 cheaper, based on an average UK home worth around £160,000.

11% of downsizers are also aiming to buy a house at least 50% cheaper to help fund their retirement, while a further 4% plan to sell their home and not buy another property.

Sean Oldfield, CEO of Castle Trust, said: “We know that many people regard property as a good way to save for retirement – in fact the ONS Wealth and Assets Survey has shown that 60% of people under retirement age think that it is the best way to do so.

“However, your home is not an investment unless you are willing to permanently downsize, which only 13% of the population plan to do.

“This means only about 1 in 8 people plan to access the value in their home to fund retirement and the remainder will be generally heavily underweight housing as an investment.

“This is extraordinary when you consider that residential property is the UK’s largest asset class – at over £4tn it is greater than equities, gilts and bonds combined. It has also historically had the highest risk-adjusted returns of any of the major asset classes.”

Castle Trust is urging homeowners to be realistic about using their home as a source of income for retirement and to consider the risks of relying on a single property rather than a diversified index.

Oldfield added: “For those 13% who are considering part of their home as an investment, they should be aware that the value of an individual property can differ greatly from the performance of the national index.”