HomeUK TRAVELCare homes close as mortgage rate rises make businesses ‘unviable’

Care homes close as mortgage rate rises make businesses ‘unviable’

Care home operators have warned that the recent rise in mortgage rates and a delay in government reforms would be the “death knell” for some UK service providers.

The number of registered care homes fell to 12,224 on May 31 from 12,280 at the start of the year, according to data shared with the Financial Times by, a care home review website.

Closing rates in the UK have slowed in the first half of 2023 compared with the same period in 2022. However, rising mortgage rates risk increasing the burden on the care sector, increasing food and fuel prices as well as funding shortfalls.

“We are facing some extremely difficult times,” said Nadra Ahmed, president of the National Care Association, a professional organization. “There are vulnerable suppliers right now and there are many [of homes] will be on the market.”

The challenges some executives face, she added, will make their “unviable”, citing Pelham House in Kent as one of the latest to run into financial trouble. “Sadly they had to make the decision to close after 40 years,” she said.

“If you have mortgages, that affects your ability to repay.”

The Bank of England raised interest rates by 0.5 percentage points to 5% in June in an attempt to curb inflation, leading to an increase in monthly mortgage payments for variable-rate borrowers.

While interest rates are not expected to rise as much as previously estimated following better-than-expected June inflation data last week, care providers are already feeling the heat.

Jay Dodhia, CEO and co-founder of Serene Care, which he founded with his wife Palvi

Jay Dodhia, chief executive officer and co-founder of Serene Care, founded with his wife Palvi, renovates and runs failed nursing homes. He said its pattern had stabilized but warned that rising interest rates could be particularly hard on new construction.

“Most nursing homes are [on] variable rates – even when rates are very low, it is difficult to get a fixed rate on care home mortgages,” he said. “As interest rates change or the BoE prime rate goes up, so do our interest payments.”

“Everything separately affects you, if you take it all together – rising inflation, utilities, food costs, staffing challenges. . . it can be a death knell for some [providers]”Dodhi said.

The number of councils in the UK reporting nursing home closures in their area rose to around 44% by the end of May 2023, according to the Association of Adult Social Service Directors, a charity.

Natasha Curry, deputy policy director for the Nuffield Trust, said that in 2019, before the coronavirus pandemic, this was about a third.

“With lending rates also skyrocketing, it’s no surprise that we’re seeing more and more nursing homes closing and I think that trend will continue to be inevitable,” Curry said.

Natasha Curry, deputy director of policy at the Nuffield Trust
Natasha Curry, deputy director of policy at the Nuffield Trust, says this trend will continue © Emile Holba

During the Covid crisis, an emergency government grant helped stabilize the market, easing the impact of reduced occupancy rates. But that grant has ended.

Cathie Williams, joint chief executive officer of the Association of Adult Social Service Directors, said councils have a duty to provide “continuous care” to residents if a home is closed.

But a decade of austerity, Brexit, the pandemic and staff shortages plus the rising cost of living have all contributed to the industry’s “significant lack of resilience”.

She added that the places where care does exist, “tends to be because they’re in the wrong place or the type of care home isn’t right or the quality isn’t good enough.”

Health leaders have warned of the impact of reduced social care availability on the broader health system. Matthew Taylor, chief executive of the NHS Confederation which represents health organizations across the UK, said health leaders know “very well the impact a lack of social and residential care has had on the NHS”.

The support provided to residents in care homes can prevent avoidable hospitalizations. Furthermore, the lack of home care locations for patients who would otherwise have been discharged could create a “paper jam effect in A&Es with extended ambulance wait times,” Taylor added.

Richard Stebles, head of intelligence at, said: “The good news is that we could see the pace of closures in England and Wales slowing down although unfortunately Scotland has picked up.

“To stay sustainable, we can see care providers trying to attract more privately funded residents who pay higher fees than those funded by local governments.”

Dodhia said the average fee for a publicly funded social care bed should be £900 a week. But local authorities usually pay around £600 to £700 a week; Some are willing to spend just £490 a week.

Care home operators had hoped to receive more funding from local governments after a “cost of care exercise” that sought to create a common understanding of the cost of social care for adults. But some councils have struggled to increase payments and reform has been pushed back to October 2025.

Providers have also battled for access to £200m set aside for the NHS crisis plan, which aims to move patients from hospital to care homes.

Dodhia said a “winter discharge fund” has been announced, but “the local government doesn’t really want to spend it”. He added: “They know that as soon as funding runs out, people will be vulnerable, because they cannot continue to fund. [the scheme].

“We’ve heard of all these great support plans but we haven’t seen any of them,” he said.

The Department of Health and Social Care says it is investing up to £7.5 billion in social care over the next two years – “the largest funding increase in history” – to strengthen social care capacity, including £1.4 billion that local authorities can use flexibly, including paying extra for social care providers.

It added: “Despite the pressures faced by the adult social care market, the number of adult social care sites registered with the Care Quality Commission has remained stable and there are now 6,600 more home care agencies in the UK than there were in 2010.”


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