Can anyone help me with year on year care home cost increases? Not sure if this is normal

This was true for my grandparents home. It's awful, such a worry but absolutely nothing you can do about it. Sorry OP.

Don’t panic, is the first step.

Then sadly, you can understand the life expectancy of people living with dementia quite well and also care home life expectancy. There are prognostic indicators that help healthcare staff plan care needs quite accurately.

Your mother has age and sex on her side but severity of symptoms and co-morbidity working against longevity. The median live expectancy from a dementia diagnosis is about 6 years from onset of symptoms and about 3.5 years from admission to a care home. Unfortunately, your mother is quite unlikely to live for much longer than 6/7 years as a maximum and probably less. Most people admitted to care homes die within about three years, less if it’s an admission for nursing care.

If you are in England, self funding for care is capped at £16,000. That means the assets can be used down to the last sixteen thousand pounds, which people are entitled to keep. Once you reach that point, local authority funding comes into effect.
If your mother has particularly complex needs, or develops additional needs, you can apply for continuing care funding. The home should be able to advise if she meets the criteria.
Once you ‘run out of money’ the amount payable to the home is often reduced for local authority contracts. It’s in nobody’s best interests to move someone approaching life’s end and very unsettling for someone with advanced dementia. It isn’t often done and shouldn’t be done for purely financial reasons - there is potential that any suggestion of movement could be a safeguarding concern as it places a vulnerable person at risk of harm.

I would suggest a frank conversation with the home registered manager. They should understand the specific circumstances for your mother and should be beginning to make longer term plans for her care.

Do you or anyone else have LPA health and finances? If so, you need to enact them to ensure full access to all information and involvement in decision making. If not, you might want to apply to Court of Protection for a Deputyship.

I would place her in the nice place she is in if you think it's the best and worry about the future later.
The worst that can happen is that the LA move her to a cheaper place and then at least she'd have had 3-5 years nice care rather than eek out the funds at a less good place.
Under no circumstances can family be held liable to pay. A few months before she runs out of money you contact the LA and ask a financial assessment but it might never happen.

You should certainly ask for a CHC checklist to be done but it sounds unlikely she will be awarded

If you don't get CHC but are in a nursing (NOT residential) home then you get FNC nursing contribution which is a small amount but still worth having so you should ask for her to be assessed for CHC. The care home will be used to the process and able to help you.
If she is just in residential care then it's pretty impossible to get CHC.

Sadly yes, it is is quite common for such increases.

On an unpleasant but practical note the average time from diagnosis of dementia to death is 7 years. surviving 20 years in a dementia care home is fairly unheard of. The reason care providers ask for 3 years funds is that is the average length of stay.

You are correct that she is unlikely to get CHC unless she has significant physical needs as well as the dementia

On the other hand maybe she is entitled to S117 funding. Has she ever been detained under S3 MHA in any of her MH hospital visits as this would entitle her to S117 funding which is free and non means tested. If it was S2 and not S3 this sadly does not count for funding.

If none of the above applies then she funds her own care until her funds drop below 23,500 and then the local authority will pick up the funding after that. The only time they might refuse to do so is if she was in a very expensive care home. If that was the case then they might want to move her but I think it's unlikely it will get to that stage.

Get her assessed for nhs continuing care, not means tested. If she is unable to live independently due to her medical condition you have a good case

Get in touch with Age UK. They will give you advice and support.

My DM has lived in three places across six years and roughly 3%, 5% and 3% pa.