Older people could lose up to 56 per cent of the value of their home to pay for rising care costs, despite increasing property prices, a specialist provider has warned.
An analysis of care home costs in 20 of the top UK cities has shown that for 12 of these, including Manchester, Nottingham, Liverpool and Derby average care costs were more than 50 per cent of the average house price in the area.
TakingCare, a subsidiary of Axa Health, who conducted the analysis, warned that Britain was in the middlle of a care crisis bolstered by staff shortages, increasing energy prices and the high cost of living, with the impact being felt by older homeowners and their adult children.
In 2021, half of first time buyers used money from their parents to pay for a house deposit according to data from estate agent Savills, but TakingCare warned that "sky-high care costs may leave little in the pot to borrow from".
With the new care regime due in October 2023, we are hopeful that this will make things easier and clearer.Will Hale, Key Later Life FinanceThe average homeowner in Britain spends eight years saving for a house deposit according to the Barclays Mortgages’ first time buyer index.
However, the analysis from TakingCare showed that just one year’s stay in a care home will cost more than the average house deposit in the UK.
Care home residents typically spend at least four years in care homes, costing individuals on average £113,000.00 - £161,000.00 depending on where they live in the UK according to ONS data.
An individual’s ability to pay for their care is calculated through a means test, leaving more than a third (36.7 per cent) of people to use the value of their home to pay for care in later life according to ONS data.
Under current government guidelines, individuals have to self-fund 100 per cent of their care home fees if their total capital is worth more than £23,250.
Since 2015, the government has made deferred payment agreements available from councils to help individuals to use the value of their homes to help pay care home costs, which enables individuals to delay repaying the council until they choose to sell their home, or until after their death.
Key Later Life Finance chief executive Will Hale said the figures from TakingCare highlighted how important it is for people to plan for what type of care they want or need in later life and how this will be funded.
Even with the new care regime due to enter force in October 2023, which would see a cap on care costs of £86,000 most people will still need to make some contribution towards their care costs, he said.
Hale explained: “With the new care regime due in October 2023, we are hopeful that this will make things easier and clearer, but importantly it should be recognised that most people will still need to make some contribution towards their care fees.
"As TakingCare has highlighted, this can be extremely expensive, and we are finding that people are looking towards housing equity for support."
He also pointed to research from Key Later Life Finance, carried out earlier this year, which showed over 64 per cent of people aged over 55s would prefer to receive care at home and over a third (35 per cent) of over-55s say the pandemic has made them carefully consider their later life care options.
Helping people stay independent for longer is a key way for homeowners to save on care home costs according to TakingCare’s managing director Steve Gates who has said fall prevention is a central element of this.
According to TakingCare one in three adults over 65 will have a fall this year and 50 per cent of those that fear falling go so far as to limit their social activities - which has an impact on confidence and independence.
Falls are still the number one reason that older adults visit A&E.
jane.matthews@ft.com
