What could this be? A relative is suddenly talking like deceased mother is alive and waiting at home for her.

Have you ruled out medical issues? UTI's can cause symptoms that are similar to dementia or increase dementia related symptoms.

If it is sudden, it's possible that she has a UTI. I didn't know this in the beginning but the elderly will not always mount the same immune system response that a younger person would. That means that they can have an infection without a fever. Sometimes the only sign is a change in behavior, like they become combative or argumentative. Sometimes the only sign is sudden delusions. My mom would suddenly ask about her cars. Where were they? She had a lot of cars that were no longer outside the house for her to see. I knew that dementia doesn't usually come on that fast or change that suddenly. Have them evaluated for a UTI, it's very common.

If your relative hasn't had delusions previously, then I would assume it's dementia. Does she specifically say they are ALIVE? My grandmother swore her MIL lived in her house after death. Grandma didn't have dementia. She just saw her "ghost". I think because her MIL had tormented her and she couldn't relax after her death. She just felt like the mean old woman was always still there.

It's part of dementia behaviors, especially towards end of life.

It is either dementia or delusions due to a mental disorder.
It is time to have a workup and diagnosis to answer your questions with expert help, because this situation requires that.
I wish you the best.