The Department of Health and Aged Care has announced the Maximum Permissible Interest Rate (MPIR) for residential aged care has increased to 8.15% from 20 September 2023 – the highest the rate has been since 2008.

StewartBrown Senior Partner, Grant Corderoy, told The SOURCE that the increased MPIR should help aged care providers recover more of the costs of providing accommodation and therefore reduce losses from the accommodation revenue stream.

“Based on the data from the StewartBrown Survey, the average RAD taken in FY22 was $455k and applying the MPIR rate current at 20 September 2022 of 6.31% the average DAP would be $78.66 per day,” Grant said.

“The average RAD taken in FY23 was $470K and based on the new MPIR of 8.15% the DAP would be $104.95 per day.

“This means that someone paying a DAP based on the average RAD that enters an aged care home today will pay, on average, $26.29 per day more than a person that entered at the same time in 2022.

“We feel that as a comparison to the average house/unit price and the cost of building and maintaining a residential aged care home, the MPIR should remain above 8% pa,” he said.

For consumers, if they have access to funds for the RAD, RADs “may become a more favoured way of paying for the cost of accommodation”, Grant said. “However, there are always other factors to consider such as length of stay, spouses, movement in house prices and the financial position of the individual resident and their family.”

The SOURCE: Maintaining an MPIR above 8% will help providers recover their accommodation expenses, however, consumers are slugged with higher fees.