Care homes are closing as rising mortgage rates make the business ‘unviable.’

Care home operators in the UK have warned of the “death-knell” that will be sounded by a recent rise in mortgage rates, and a delayed government reform. – a review site for care homes – shared data that showed fewer care homes registered on May 31, down from 12,280 in January.

In England, the rate of closures slowed down in the first half 2023 compared to the same period of 2022. A rise in mortgage interest rates could increase the burden on the care sector by compounding the rising costs of food, fuel and funding.

Nadra Ahmed, the chairperson of National Care Association (a professional organization), said that we are in for some very challenging times. “There are many vulnerable providers and a large number of homes that are going to be for sale.”

She added that the challenges faced by some operators will make their business “unviable”. She cited Pelham House, in Kent, as an example of a recent operator to run into financial difficulties. She said that after 40 years, they were forced to close their doors.

If you have mortgages, it will affect your ability to pay back your loans.

In an attempt to curb inflation, the Bank of England raised interest rates in June by 0.5 percentage point to 5 percent. This led to increases in mortgage payments for those borrowers with variable rates.

Care providers are already feeling it, even though interest rates may not rise as much as expected following the better than expected June inflation figures last week.

Serene Care is run by Jay Dodhia and his wife Palvi. They renovate and manage failing care homes. He noted that the model was resilient, but warned that rising interest rates may be especially challenging for new construction.

He said that “most care homes have variable rates – even when rates were low, it was difficult to get fixed rate mortgages for care homes.” As the variable rate or underlying BoE rate crept upward, so did our interest payments.

If you combine everything, you will be affected by the rising costs of utilities, food, and staffing. . . Dodhia said that it could be the death knell of several [providers].

According to the Association of Directors of Adult Social Services (a charity), the number of councils reporting closures of care homes in their area increased to approximately 44 percent at the end of the month of May 2023.

Natasha Curry is the deputy director of Nuffield Trust’s policy department. She said that in 2019, the rate was around a third before the pandemic.

Curry said that the trend of closing care homes is inevitable, given that borrowing rates are also skyrocketing. During the Covid crisis, an injection of emergency government funding had helped to stabilise the market, cushioning the impact of falling occupancy rates. But that funding had ended.

Cathie Williams is the joint chief executive of Association of Directors of Adult Social Services. She said that councils have a responsibility to ensure “continuity of service” for residents in case a home closes.

A decade of austerity measures, Brexit, pandemic, and staff shortages, compounded with rising living costs, had all contributed to a “considerable lack of resilience” within the sector.

She added that when care homes existed, it was usually because they were in the wrong location or wrong type of care home or their quality wasn’t good enough.

Health leaders have warned about the impact of a shrinking social care capacity on the health system. Matthew Taylor, the chief executive of NHS Confederation, which represents health organizations across the UK, stated that health leaders “all too clearly” knew the impact of a lack in social and residential care on the NHS.

Support provided to residents of care homes may prevent unnecessary hospital admissions. Taylor said that a lack in care homes for patients who would have otherwise been discharged could cause “a logjam effect” at A&Es, with long ambulance waiting times.

Richard Stebles is the head of’s business intelligence. He said: “The good news, we are seeing a slowdown in England and Wales. Unfortunately, Scotland has seen an increase.”

“In order to remain sustainable, it is likely that care providers will try to attract more residents who are privately funded and pay higher fees than those paid by the local authority.”

Dodhia stated that the average cost of a publicly-funded social care bed is PS900 per week. Local authorities pay about £600-700 per week, and some are even willing to spend only £490.

After a “cost-of-care exercise” to create a common understanding of the costs of adult social care, care home operators hoped that local authorities would provide more funding. Some councils found it difficult to raise payment, and the reforms were delayed until October 2025.

The providers have also been fighting to get the £200mn allocated for the NHS Crisis Plan. This plan aimed to transfer patients from hospitals into care homes.

Dodhia said that although a “winter relief fund” was announced, “local authorities did not really want to use it”. He said: “They knew they would leave the residents vulnerable if that funding ran out.”

He said, “We heard of all these wonderful support plans but didn’t see them.”

The Department of Health and Social Care announced it would invest up to £7.5bn over the next two-year period in social services — “the largest funding increase in history.” This includes £1.4bn which local authorities can use in a flexible manner, such as to pay more to social care providers.

The report added that “despite the pressures on the adult social-care market, the number adult social-care locations registered with Care Quality Commission has remained constant, and there are now 6,600 more homecare agencies in England than 2010.

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