“E.s.” commented on my earlier post:
Too Good To Be True
about the ridiculous proposition for turning lead into gold
(offering fixed rates home loans in the South African Rand at 6% interest). The interesting
thing here is that since Rudco’s initial plans were announced, interest rates have ticked
up several points, and are likely to increase further in December (consensus from the
market is currently around 50bps) and quite possibly again early next year.
I’m sorry E.s., you clearly haven’t been reading the blogs and comments here and other places. To repeat the four themes:
- The business model is not viable therefore you should expect problems sooner or later.
- Rudco are in contravention rules, regulations and judgements, so you should expect problems sooner.
- There has been precious little evidence that Rudco actually has any of the money to either grant new loans or transfer loans from other banks.
- From what I’ve seen, Rudco is more in the habit of collecting money from customers rather than paying out money. There are real financial risks to prospective clients.
Lastly, when Rudco finally disappears (long overdue) staff, brokers and customers will be burnt. Even if you misguidedly think that there is no risk to you (I disagree), you should also recognise that there is no upside since this structure cannot work, and there is definite downside to others involved in the process.
If anyone thinks that the other banks, Treasury, the Reserve Bank and the FSB are going to bail out the fools who were looking for a too-good-to-be-true deal, think again. I’ve been following the comments around the web for several months now.
The first few months were characterised by a few words of warning, and many commentors saying “don’t knock Rudco” and “just because someone is looking out for the little guy doesn’t mean the big banks should try to shut him down” and similar utter nonsense. The weight of comments has now swung heavily towards complaints and hard questions.
Rudco is finished. They were finished at the start for anyone who had their eyes open.