Homeowners can boost their retirement pot by £500,000 by downsizing

Those approaching retirement can choose to downsize as a way to free up capital and put it towards monthly income.

As the cost of living crisis continues, homeowners may choose to downsize as a way to boost their cash.

The UK average would see homeowners earn £498,687 if they downsize from a five-bed to a three-bed.

However, it should be noted that this figure doesn't take into account costs incurred in the moving process such as stamp duty.

Those who own their homes outright in London could earn the highest return, gaining almost £1.1million in cash by downsizing from an average five-bed of £1.7m, to a three-bed averaging at £635,149, according to data from Rightmove.

The data is based on today's average property values and asking prices in each region, and assumes they move to a smaller home in a comparable area.

Tim Bannister, Rightmove property expert said: "Downsizing is a sensitive topic for many homeowners, as emotional ties and the inconvenience of moving often deter them from selling their family homes.

"However, empty nesters may overlook the significant benefits of downsizing, such as reduced energy bills and increased cash from purchasing a smaller home, that can still cover moving costs with leftover returns.

"By transitioning from a five-bedroom to a three-bedroom house, homeowners could still retain spare bedrooms for guests and free up on average half a million in cash for other uses before moving costs."

Five-bedroom properties have seen substantial price growth over the past decade. Homeowners who purchased their properties in 2014 have experienced on average a 36 per cent increase in the value of their property.

Although less in cash value, those in the North East can earn the highest percentage return.

They will get up to 65 per cent of the value of their five-bedroom house, making a return of £339,425 from a five-bed house worth on average £520,873.

James Linder, Regional Sales Director at Leaders Romans Group, said: “We’ve observed a trend in downsizing among homeowners, particularly in towns with family homes and larger urban areas.

"Many people are downsizing to release equity, often using the substantial cash returns to help their children get onto the property ladder.

"Additionally, the potential savings on energy bills, council tax, and maintenance costs are considerable. Moving can save homeowners a significant amount annually in energy costs alone.

"Lower council tax and reduced upkeep expenses further enhance the appeal of downsizing."

Annual house price growth remained at 2.7 per cent in June as the property market appears to have paused in the build-up to the general election, official figures from Office for National Statistics (ONS) House Price Index suggests.

This puts the average UK house price at £288,000, £8,000 higher than a year ago.