a client lives in her own home and Pension Credit paying mortgage interest. She has now to move to Sheltered Housing due to ill health. She will continue to pay mortgage until house is sold. How will this work with pension Credit as she will have to claim Housing bnefit for new house. Will housing costs cease for old house?

All references I can find in CPAG handbook mention the home.
Pages 811 and 814 will probably cover your clients situation.

In general housing costs can only be met for one home - the one in which client will reside permanently. However there are exceptions which the handbook defines.

Hope this helps.