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 www.agedcaregurus.com.au.

 

  •   20 July 2022
  • 1
  •      
  •   

RELATED ARTICLES

12 tips for ‘aged care season’

Age pension is increasing: what you need to know

Recent age pension changes impact non pensioners too

banner

Most viewed in recent weeks

Building a lazy ETF portfolio in 2026

What are the best ways to build a simple portfolio from scratch? I’ve addressed this issue before but think it’s worth revisiting given markets and the world have since changed, throwing up new challenges and things to consider.

Ray Dalio on 2025’s real story, Trump, and what’s next

The renowned investor says 2025’s real story wasn’t AI or US stocks but the shift away from American assets and a collapse in the value of money. And he outlines how to best position portfolios for what’s ahead.

13 million spare bedrooms: Rethinking Australia’s housing shortfall

We don’t have a housing shortage; we have housing misallocation. This explores why so many bedrooms go unused, what’s been tried before, and five things to unlock housing capacity – no new building required.

21 reasons we’re nearing the end of a secular bull market

Nearly all the indicators an investor would look for suggest that this secular bull market is approaching its end. My models forecast that the US is set for 0% annual returns over the next decade.

Making sense of record high markets as the world catches fire

The post-World War Two economic system is unravelling, leading to huge shifts in currency, bond and commodity markets, yet stocks seem oblivious to the chaos. This looks to history as a guide for what’s next.

3 ways to fix Australia’s affordability crisis

Our cost-of-living pressures go beyond the RBA: surging house prices, excessive migration, and expanding government programs, including the NDIS, are fuelling inflation, demanding bold, structural solutions.

Latest Updates

Property

How cutting the CGT discount could help rebalance housing market

A more rational taxation system that supports home ownership but discourages asset speculation could provide greater financial support to first home buyers.

Investment strategies

The Ozempic moment for SaaS

Every investing cycle has its Ozempic moment, a narrative shock so compelling that the market briefly forgets that incumbents can and do adapt to transformative technology like AI.

Superannuation

Meg on SMSFs: Last word on Div 296 for a while

The best way to deal with the incoming Division 296 tax on superannuation is likely doing nothing. Earnings will be taxed regardless of where the money sits, so here are some important considerations.

Investment strategies

If people talk about a bubble, it’s unlikely to crash soon

It is almost impossible to identify a bubble in real time, and history shows they last far longer than we think, giving investors (perhaps misplaced) hope and short-sellers seemingly endless pain before the share price collapses.

Investment strategies

Seismic shifts that could drive private markets

Dealmaking appears to be on the mend, but investors could be well served to look through near-term trends toward six major themes that we think may drive private markets for years to come.

Latest from Morningstar

Corporations are winning the stock market. Here’s a new plan for everyone else

Retail investors have the worst trading record, according to a study of trading performance. Institutional investors weren't at the top either. Here are 6 ways to improve your odds.

Infrastructure

The bull case for Melbourne

A counterpoint to today’s prevailing narrative that Melbourne is the capital of a failing state defined by its strained public finances, COVID hangover and an opposition obsessed with undermining its own credibility.

Sponsors

Alliances

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
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.