Retail sales rise for third-straight month

THE CANADIAN PRESS

OTTAWA–Retail sales increased for the third straight month in March in a further evidence of a stabilizing Canadian economy or at least a slowing of the torrid pace of decline experienced early this year.

And economists say the data, one of the last major pieces of information left that make up the first quarter gross national product reading, suggests the first three months of 2009 might not be as bad as some feared.

"I think we've put to bed the notion that the first quarter hit could be as large as nine or 10 per cent (contraction), which was some of the scare talk earlier in the year," said Derek Holt, vice-president of economics with Scotia Capital.

"Now we're only looking at about 6.5 per cent contraction."

That would still be the biggest quarterly decline in GDP since records began being kept in 1961, beating the 5.9 per cent fall-off in the early 1990s.

The actual retail sales pickup of 0.3 per cent in March, to $33.9 billion, was smaller than some economists had hoped. But it also obscures the better 0.7 per cent increase in the volume of sales.

That suggests Canadian were buying again, but partly because they were taking advantage of bargains, particularly large rebates at car dealerships.

Bank of Montreal economist Douglas Porter said after the sizable decline in retail sales last fall and over the holiday season, the modest bounce-back is at least partly pent-up demand and likely does not signal a major and lasting change of sentiment among consumers.

"It's nice to see three modest gains in the row, but we have to take into context that they took an absolutely massive step backward last year. We're only just beginning to recover," he said.

Statistics Canada noted the three consecutive months of gains in retail sales have not completely offset the sharp declines reported in November and December.

The agency says March's retail sales were 6.3 per cent lower than their peak in September 2008, and the volume of sales were down 2.6 per cent.

The main contributor to the rise was a six per cent volume increase in new vehicles, while the automotive sector as a whole increased by 0.5 per cent.

Holt cautioned that the new figures already show the gain in March auto sales won't be repeated when the April numbers are released next month, as "we already the volume of new vehicle sales was flat in April over March."

As well, higher food prices boosted sales at food-and-beverage stores, which rose 0.9 per cent, their third straight increase.

The largest drop in the four sectors that registered sales declines came at miscellaneous retailers where sales fell 0.7 per cent. The sector includes sporting goods stores and office supply stores.

Sales increased in seven provinces in March, led by a third straight month of rising sales in Quebec, at two per cent, and Ontario, at 0.6.

The largest sales decline in March was a 1.8 per cent drop in Alberta, coming on the heels of a 1.5 per cent decrease in February.

Bank client floored by penalties

Ellen Roseman

When Rahim Moosa lost his job last October, he decided to sell the house he'd bought with his wife a year earlier.

His lender, TD Canada Trust, said there would be an $8,000 penalty to break his five-year closed mortgage – an amount he found tolerable.

"By the time we sold in April 2009, TD Bank quoted us a doubled penalty of $18,000. Now, they are stating it will be approximately $25,000 upon closing in June," he says.

Most mortgage contracts and renewal forms specify that clients seeking an early exit will pay either three months' interest or an interest rate differential (IRD), whichever is greater.

The IRD is calculated by taking the outstanding balance, multiplying it by the gap between your existing mortgage rate and the current rate for a term similar to what you have left, and multiplying by the number of months left to the end of your term.

Mortgage rates have fallen steadily since last fall, making the IRD penalties grow bigger and bigger.

Once I got involved in Moosa's case, TD worked hard to cushion the blow. It sent him to a mortgage specialist, who suggested making a 15 per cent lump-sum prepayment using a line of credit that would be paid back at closing.

Since TD hadn't told him about this option last October, Moosa asked for and received the right to make a 30 per cent prepayment to reduce the outstanding balance.

The estimated penalty is now $11,000 to $14,000.

"We won't know for sure what the exact penalty will be until the payments are made using the line of credit next week," Moosa says.

He wonders why TD dragged its feet when told about his financial problems last fall.

"Our branch representative should have advised us that we could pay a 15 per cent lump sum to reduce the penalty.

"TD needs to have a better process in place, particularly when dealing with clients whose largest investment is in their hands."

Moosa's comments will be reviewed, Hechler said. "We could have moved more quickly to help and provided clearer information from the beginning."

Kevin Plautz, also a TD mortgage customer, felt he received misleading information when he asked about breaking the deal to take advantage of lower rates.

His financial adviser initially quoted a penalty of $2,100, based on three months' interest. Other TD staff he spoke to later did not challenge that figure.

Only when he was ready to renegotiate did he learn there would be an IRD penalty of $5,900.

"I wouldn't have bothered doing a renegotiation if I had just been told the correct penalty at the start or one of the many times I asked about it since then," he says

TD agreed to reduce his IRD penalty to $4,000 after I escalated his complaint to the head office.

"We have offered to substantially reduce the amount of Mr. Plautz's IRD penalty as a goodwill gesture in recognition of the confusion he experienced over the amount he was quoted," Hechler told me.

While planning to take the offer, Plautz is leaving TD. He's found another bank that will give him a lower interest rate and cover $225 of his $270 mortgage discharge fee.

"I have a very bad taste in my mouth. I think I still prefer to move my business," he says.

I'd like to hear from readers. Have you tried to renegotiate a mortgage amid falling interest rates? How did the lender respond and what penalty was charged? I'll publish comments in a future column.

Write to onyourside@thestar.ca