It had to happen. After decades of rolling up right on time for everything from sex, drugs and rock’n’roll to cheap breaks and affordable property, the baby boomers’ gravy train has finally been derailed.

As the jammy generation approaches its silver years, suddenly nothing is going to plan. In most cases, there wasn’t even a plan, just a vague awareness that, when the time was right, they could downsize, maybe give the kids some cash and top up their pension. Now, not only can they not sell the house, it’s beginning to look horribly as if - even when they do sell – they will end up with far less than they had been banking on.

And banking on it they have been.

Although they are old enough to remember the property crashes not just of the early 1990s, but of the 1970s, one in three baby-boomer homeowners will still have a mortgage when they reach retirement age. According to research from Impartial.co.uk, an online “find a mortgage” service, more than 1.4m homeowners aged over 55 have at least 10 years left to run on their mortgages. It could be time to rethink.

Even so, the boomers still hold a disproportionate amount of housing wealth – a fact obvious to many struggling first-time buyers when they rather enviously compare their own finances with those of their parents. According to figures compiled for The Sunday Times by agents Knight Frank (see table, right), 55-to 59-year-olds make up 11.6% of UK households, but have 14.4% of the equity. The effect is even more pronounced with 60-to 64-year-olds, who, although they make up just 7.9% of households, have 11.7% of the equity. By contrast, 25-to 34-year-olds account for 13.6% of households, but have just 3.2% of the equity.

Janet Shearer, 55, is an artist and author who lives in Cornwall. In 1987, she bought her old stone farmhouse, with outbuildings and five acres, set deep in a wooded valley, for £80,000. Over time, she has borrowed against the property to improve it, and last year had it valued at between £750,000 and £1m, depending on which agent she listened to. Her children, Doon, 25, and James, 24, had gone their own ways and she was free. “I was tempted to sell,” she says. “I could pay off my mortgage, help the children, change my life.”

Shearer hesitated. Despite looking in France and around Britain, she couldn’t find anything to compare with her own secluded idyll. By the time the market had peaked and stalled, she felt almost relieved. “I missed the boat for selling, but this is my life – my studio is here, my horses are here,” she says. “I had a good old look, but after weighing everything up, I decided to do a shuffle round my own property, moving into the converted barn and letting out the house.”

Now she has put Higher Grogley Farm on the books of Uniquehomestays. com, offering art tuition as an extra. “For as long as I can hang on, it will pay the mortgage,” she says. “It also allows me to carry on working as normal.”

In fact, for Shearer, the property crisis probably came at a good time. Yes, it was tempting to cash in, but she’s glad she was forced to stay put. “This way, I can stay for as long as I want. The children aren’t ready to settle yet, so they don’t need anything from me, and the mortgage gets paid. I’m not a starving artist, but this allows me to continue my business in a place I love.”

Ed Mead, director of Douglas & Gordon, an estate agency with offices in west and southwest London, says that the most affluent baby boomers have only just been hit. “It’s very recent. PostLehman Brothers, they’ve started worrying about where their savings are, and about the future.”

And, like Shearer, many of them have started to get imaginative about their living arrangements. Mead tells of one couple who had bought their two children a small house in Batter-sea, south London. They couldn’t sell the family home in Somerset – so they’ve done a swap with their kids. The parents now live in the London house, while one of the children has moved, with his own family, into the larger Somerset property. The arrangement suits everybody for the time being.

Mead believes that, for most people, it makes sense to hang on in – not least because of the dearth of potential buyers. “After the crash of 1989, it took seven or eight years for prices to come back,” he says. “This time it’s different, because everything has happened so quickly. Prices have dropped by 25% in six or seven months, so it should take only three or four years for them to come back.”

Others, including Liam Bailey, head of residential research at Knight Frank, are more cautious. “Our view is that things will bottom out in terms of price falls by 2010,” he says. “On a UK-wide basis, it will be 2015 before prices get back to the 2007 peak.” There will, however, be regional variations: the agency expects prices in central London to be back at last year’s levels by 2012, with the rest of the country, starting with the southeast, following thereafter.

“If people think they will stay in their present home for five or 10 years, then what does it matter?” Bailey adds. “You just have to ride it out and ignore it. But it’s different if you have a plan, such as moving abroad, changing location or downsizing – although, if you have something else to buy, at least that will be cheaper, too.” Savills estate agency expects the market to bottom out next year at about 25% below the peak; Lucian Cook, its director of residential research, sees prices back at 2007 levels by 2012 in the southeast and prime central London, with the southwest, the east of England and the rest of London following the year after. Recovery will then spread northwards, although it could take until 2016 in Northern Ireland. “The risk to this pattern is if we go into a deep recession, which will push it out,” Cook says.

Tony Davison, 62, managing director of a software business, is content to hang on. Early last year, he decided to sell his eight-bedroom house in Wimbledon, southwest London. “I don’t need such a big house, and the plan was to gift each of my children enough money to enable them to get on the then rising property ladder,” he says. “I did some remedial work and put it on the market in June 2007.”

Davison accepted an offer of £4.25m. “He was a senior man in a hedge fund who apparently had no chain, nor any need for finance, but he pulled out for personal reasons in August, about a week before we were due to exchange.” The timing couldn’t have been worse. There were other offers, but nothing to match the first one. “Gradually, the bottom fell out of the market, so we have withdrawn it now,” says Davison, who has four children, Michael, 32, Sarah, 30, Martin, 28, and Daniel, 26.

In the meantime, the house, which Davison bought in 1982 for £192,000, is being well used by the whole family. Newlyweds Michael and Liz have moved in, as has Daniel. Even Martin’s wife, Henny, 28, is using the large double garage as overflow storage for her events and weddings business, Hennylynneflowers.co.uk.

“It’s convenient for everybody and the house is in a much better state than when I am here on my own,” Davison says. “When the market reestablishes itself, the house will have a value, one that I assume will be substantially less than it was. The upside is, so will the places the kids hope to buy, so I won’t have to give them so much.”

Davison is stoical about the situation, but, obviously, the more valuable the property, the bigger the hit. John Bennett, a businessman, put his house in St John’s Wood, northwest London, on the market five months ago. Last year, he would have expected to get upwards of £10m for it; now it’s stuck, and he is about to lose the deposit he has put down on a new property. “This is going to cost me £2m,” he says.

To be more precise, it’s going to cost his children £2m. They are the ones who were going to share the useful difference between the price of the family home and their father’s new house, Still, like the Davisons, they will benefit from a similar percentage fall in the price of the properties they eventually buy.

In any case, pain is relative. While Shearer’s, Davison’s and Bennett’s homes might not sell for as much as they would have done this time last year, they are still worth several times what they paid for them. The gravy train has never let the baby boomers down before. One of these days, they know it’ll be back on track.

How to survive the slump

The market is not expected to hit the bottom until 2010 at the earliest, so if you need to sell any time soon, there is little point in waiting. You may get even less for it this time next year. Be realistic about the asking price.

If you really want to stay put, you could raise money through an equity-release scheme – a specific type of mortgage, aimed at the capital-rich but income-poor, under which the interest is rolled up and deducted from the proceeds when the property is sold (usually on death). Check the small print carefully, though: there may be more cost-effective ways to borrow money.

If you have a large garden, consider selling part of it to a developer or apply for planning permission to build on it yourself. It won’t make you any friends among your neighbours, but it could raise a healthy chunk of capital – and mean less time spent mowing the lawn.

Let out the spare room, your garage, a parking space – or maybe the whole house, renting something smaller for yourself.

If your children have kids of their own and are struggling to afford somewhere with more space, then why not swap homes with them?

Don’t feel too sorry for yourself. Your house is almost certainly worth less than it was last year – but probably considerably more than you paid for it all those years ago.

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