According to research from the Joseph Rowntree Foundation (JRF), this is equivalent to the population of Cardiff.
The Foundation said that the poverty rate for households buying with a mortgage would rise from 10 per cent in 2020/2021 to 12 per cent. The JRF added that this was the highest the poverty rate had been for this group for a decade.
The research also found that households would see monthly housing costs increase to 54 per cent of monthly income, up from 38 per cent previously.
In cash terms, this is a rise of £350, from £610 a month to £860 a month.
The Foundation said that low income households with mortgages were also facing rising food and energy costs in addition to increasing monthly mortgage costs.
Demand for PRS will rise
The JRF warned that due to higher mortgage rates when people remortgage or remain on variable or tracker rates, there could be an increase in demand for private renting as households struggle to access mortgages or sell their mortgaged properties.
Consequently, there could a rise in rent prices due to growing demand for rental property.
The charity noted that even if mortgage rates fell back below three per cent and house prices were similar to current levels, lending criteria could remain stricter, which would make it more challenging for first-time buyers.
Government should protect mortgage holders
The JRF urged the government to protect mortgage holders that were most likely to face the “most acute financial distress”.
It added that the government should provide emergency support to private renters so they could afford their housing costs and maintain housing transactions, so the market doesn’t shut down. The charity said that this would keep first-time buyers in the market.
The government should also increase the capacity for councils and housing associations to buy homes.
The JRF also encouraged the government to set out an “overall goal of achieving a managed correction in house prices”.
Darren Baxter-Clow, senior policy adviser at JRF, said: “The government should rightly be concerned about the looming mortgage crisis and the crisis already being faced by private renters.
“Support must be targeted at mortgage holders in poverty and those who could be pulled into poverty by their housing costs, who risk losing their homes, along with private renters who are already facing rapidly rising costs.”
He added: “However, any support must not just prop up a broken housing market. Exorbitant house prices have shut millions out of homeownership for decades and trapped too many in an unaffordable, insecure, and poor quality private rented sector.
“Any crisis support must end the current cycle of boom and bust and work towards a healthier and more equitable housing system.”
