Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 467

Biggest change in the Aged Care Interest Rate since the GFC

Whether you are an investor or borrower you will know that rates are rising. On 1 July 2022, the Aged Care Interest Rate (better known as the Maximum Permissible Interest Rate or MPIR) jumped from 4.07% p.a. to 5% p.a. It’s the biggest change in rate since the GFC which saw the rate drop from 11.31% p.a. to 8.76% p.a.

Who is affected by the rate change?

The new rate applies to people who enter aged care from 1 July 2022 and existing residents who move to another home. Existing residents who are paying the market price for their accommodation will also be subject to the new rate if they choose to move rooms in their current aged care home.

The majority of people who live in aged care pay the market price, determined by a means test that uses a combination of your assets and income. Generally, if you have assets (which includes your home unless it’s occupied by a ‘protected person’) worth more than $178,839 then you will pay the market price. Low means residents are typically people who don’t own a home, or their home is occupied by a protected person, and their other assets are below $178,839.

A protected person includes;

  • Your partner or dependent child.
  • Your carer, who has lived in the home with you for the last two years or more, and is eligible for an Australian Income Support Payment (for example Age Pension, Disability Support Pension or Carer Payment).
  • Your close relative, who has lived in the home with you for the last five years or more and is eligible for an Australian Income Support Payment.

If you are not sure whether you will be a market price or low means resident, you can use the Government’s My Aged Care Fee Estimator to calculate your fees or you can submit a Calculation of your cost of care form to Centrelink.

The effect of the change in interest rate will also depend on whether you will pay for your accommodation by a lump sum, daily charge or a combination. The aged care interest rate is used to determine the Daily Payment for market price residents and the lump sum for low means residents.

Most residents choose to pay a Daily Payment or a combination, there are lots of reasons for this including not wanting to sell the family home for sentimental reasons. Financially speaking, keeping the home can also have benefits because it has a capped value of $178,839 for the aged care means test and a 2-year asset test exemption for calculating your Age pension.

Let’s say you are a market price resident who has an aged care bed worth $550,000 and you are going to pay by Daily Payment on 30 June it will cost $61.33 per day but if you moved on or after 1 July the same bed will be $75.34 per day, that’s a difference of $5,114 per year. If the market price was $1 million the difference would be $9,300 per year and if you choose the most expensive aged care bed the difference could be $27,900 per year.

If you are a low means resident, then moving after 1 July would mean the same Daily Payment but a lower lump sum. If your daily payment is $50 the lump sum equivalent on 30 June is $448,403, but if you move on or after 1 July it will be $365,000.

With many economists tipping multiple rate rises over the coming year it seems that these trends – daily payments becoming more expensive for residents paying the market price and lump sums becoming cheaper for low means residents – are likely to continue.

Impact of 2% further rise

If we assume the MPIR reaches 7%, the market price resident above paying $550,000 by daily payment will pay $105.48 per day, an increase of $11,001 per year from today’s price. For the low means resident with a daily payment of $50 the lump sum equivalent will be $260,714.28 which is $104,285 less than today.

If you or a loved one are considering moving into aged care, it is worth seeking advice from a Retirement Living and Aged Care specialist.


Rachel Lane is the Principal of Aged Care Gurus where she oversees a national network of adviser dedicated to providing quality advice on retirement living and aged care. She is also the co-author of a number of books with Noel Whittaker including the best-seller 'Aged Care, Who Cares?' and their most recent book 'Downsizing Made Simple'. To find an adviser or buy a book visit



12 tips for ‘aged care season’

Age pension is increasing: what you need to know

Recent age pension changes impact non pensioners too


Most viewed in recent weeks

2024/25 super thresholds – key changes and implications

The ATO has released all the superannuation rates and thresholds that will apply from 1 July 2024. Here's what’s changing and what’s not, and some key considerations and opportunities in the lead up to 30 June and beyond.

Five months on from cancer diagnosis

Life has radically shifted with my brain cancer, and I don’t know if it will ever be the same again. After decades of writing and a dozen years with Firstlinks, I still want to contribute, but exactly how and when I do that is unclear.

Is Australia ready for its population growth over the next decade?

Australia will have 3.7 million more people in a decade's time, though the growth won't be evenly distributed. Over 85s will see the fastest growth, while the number of younger people will barely rise. 

Welcome to Firstlinks Edition 552 with weekend update

Being rich is having a high-paying job and accumulating fancy houses and cars, while being wealthy is owning assets that provide passive income, as well as freedom and flexibility. Knowing the difference can reframe your life.

  • 21 March 2024

Why LICs may be close to bottoming

Investor disgust, consolidation, de-listings, price discounts, activist investors entering - it’s what typically happens at business cycle troughs, and it’s happening to LICs now. That may present a potential opportunity.

The public servants demanding $3m super tax exemption

The $3 million super tax will capture retired, and soon to retire, public servants and politicians who are members of defined benefit superannuation schemes. Lobbying efforts for exemptions to the tax are intensifying.

Latest Updates


Uncomfortable truths: The real cost of living in retirement

How useful are the retirement savings and spending targets put out by various groups such as ASFA? Not very, and it's reducing the ability of ordinary retirees to fully understand their retirement income options.


On the virtue of owning wonderful businesses like CBA

The US market has pummelled Australia's over the past 16 years and for good reason: it has some incredible businesses. Australia does too, but if you want to enjoy US-type returns, you need to know where to look.

Investment strategies

Why bank hybrids are being priced at a premium

As long as the banks have no desire to pay up for term deposit funding - which looks likely for a while yet - investors will continue to pay a premium for the higher yielding, but riskier hybrid instrument.

Investment strategies

The Magnificent Seven's dominance poses ever-growing risks

The rise of the Magnificent Seven and their large weighting in US indices has led to debate about concentration risk in markets. Whatever your view, the crowding into these stocks poses several challenges for global investors.


Wealth is more than a number

Money can bolster our joy in real ways. However, if we relentlessly chase wealth at the expense of other facets of well-being, history and science both teach us that it will lead to a hollowing out of life.

The copper bull market may have years to run

The copper market is barrelling towards a significant deficit and price surge over the next few decades that investors should not discount when looking at the potential for artificial intelligence and renewable energy.


Global REITs are on sale

Global REITs have been out of favour for some time. While office remains a concern, the rest of the sector is in good shape and offers compelling value, with many REITs trading below underlying asset replacement costs.



© 2024 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.