Despite media claims of a mortgage “cliff” leading to a drastic drop in consumer spending, recent evidence suggests that the impact of higher interest rates on the Australian economy will be minimal.

According to a report by investment bank Citi, only 4% of households are expected to be affected by the rollover from lower fixed rates to higher variable rates, with most of these households in the higher income brackets.

Furthermore, households are better placed to manage the transition due to higher savings rates.

Finally, the report determined that the impact of travel spending normalizing could be more of a threat to retailers than the mortgage cliff.

All in all, the evidence suggests that the fear of the mortgage cliff is “overstated” and the impact of rising interest rates on the economy will be minimal.

“Low to middle income earners facing the so-called mortgage cliff represent only around 4% of all households,” says Citi analyst Adrian Lemme.