As the founding director of Novellus, Billy McManus works closely with his team to provide a bespoke lending service. Not only does Billy have his own buy to let property portfolio, he also has experience in investing in a range of global markets.
His team have also worked on various mixed-use development schemes within the UK. It is this background that has given him vast experience of being both the borrower and lender, having sat on ‘’both sides of the fence’’.
We met recently with Billy to find out more about the man behind Novellus and get his outlook on the Bridging industry.
- What led you to set up Novellus Bridging?
- Can you sum up the Novellus ethos in 10 words or less?
- How are specialist lenders like Novellus different to high street banks?
- What do you enjoy most about being involved in the bridging finance business?
- hat did you want to be when you were a child?
- What do you dislike most about the finance industry?
- What developments do you see for the bridging finance industry over the next 10 years?
- What has been your biggest business win in the finance industry so far?
- How do you see the buy to let market developing in the near future?
I had been actively involved in the Bridging space both individually and through my private equity business so the decision to have a company solely focused on Bridging lending seemed like a natural choice.
A well capitalised, uncomplicated common sense lender.
We are a very lean business and I’m the sole Shareholder. This enables us to swiftly evaluate opportunity (and risk) as we see fit.
Banks have a lot more regulatory pressure, legacy issues and a variety of boards/shareholders which can make changing direction, policy and decisions a lot more cumbersome.
I think the specialist market has more recently begun to lose its identity which is driven largely by competition from many lenders using external capital (institutional credit lines etc.).
As such, we are seeing an increasing number of deals which we would consider being priced more in line with niche banks and almost replacing the previous “self-certified” mortgage market. My view on this is that the pricing has become too competitive for the risk and we expect there to be a mass exodus of capital from the market as the funders begin to experience losses to their fairly low margin investment (s).
I enjoy the speed and range of opportunities to lend that it presents. I enjoy dealing with individuals who I believe have been let down by large aspects of the mainstream banking sector and helping them to fill that gap.
A tennis player
I think the finance industry, in general, is very strong. I think the Bridging industry does have some weaknesses which I suspect the next downturn may rectify. We know of many lenders who record refinances of loans that have run past or are due to run past term as “new loans”.
This kind of misrepresentation contributes to the opinion the market is in much ruder health than I believe it truly is. I think the fee structure for brokers is unsustainable and needs to evolve as the sector matures. When you consider the fees charged in a Buy-to-Let (BTL) application compared to a residential mortgage application, there is a huge discrepancy which I expect will be addressed following the next market correction.
I think it will almost be a full cycle. Sadly, although many have seen the previous crash where leverage and risk contributed greatly to the downturn, I am seeing a lot of repeat behaviour (particularly in the bridging space).
We expect some lenders dependent on external capital to have exited the space within the next 24 months followed by a considerable consolidation. From there, I think the risk will return to the 2009/2010 approach meaning lenders using their own capital will continue to carry out thorough diligence. I expect the privately funded businesses who come out the other side to be stronger and more professional.
We have never had any capital or interest impaired which is something we are very proud of (particularly when that statement applies to the last 6 years of actively lending in the space both with Novellus Bridging and previous businesses)
I think the sector is well-positioned with some very professional and experienced businesses competing. Pricing remains very keen and I think as a borrower, there is a huge amount of choice.
However, I think at a Macro level, it’s a very hard space to recommend investment in (as an owner). The impact of HMRC’s changes to the payment of Capital Gains Tax (CGT), mortgage relief (capped at basic taxpayer rate), the removal of 10% wear and tear allowance, coupled with the additional 3% Stamp Duty Land Tax (SDLT) on each purchase are putting huge downward pressure on value.
Despite obvious headwinds as a result of these changes, the sector is very well capitalised and continues to attract fresh resources. I would be concerned if the appetite were to fall off and would expect more bad news than good to be coming in the space in the next 12-24 months.
- Do your own research and don’t be afraid to call a lender directly to discuss your situation.
- Ensure your broker is taking the case to the whole market, ask them to confirm the percentage fee they are being paid for introducing the case.
Meet your prospective lender to understand them and their lending ethos. Bridging and Specialist lending is higher risk both in its nature and pricing and as such, there will be bumps in the road – you should treat your lender as a funding partner and try and identify someone experienced who has the ability and perhaps equally importantly, the mandate to be able to be flexible and work with you to overcome any hurdles during your loan. It is a trust and people business.
I would highly recommend only using a broker who you pay and all procurement fees are paid back to you/discounted off of your rate.