Australian mortgage securitisation activity has slowed sharply this year as major banks and other ADI lenders tap wholesale markets and retail depositors to fund their home loan operations.Research published by Standard and Poor's shows that the value of Australian RMBS issuance could halve this year following a stellar 2017 in which 43 programs transferred A$35 billion of mortgage assets to investors. In the first five months of 2018 only seven RMBS transactions worth $5.64 billion were completed.The dip in the local market is a stark contrast to buoyant activity in Europe and the United States where mortgage-backed securitisation programs are roaring back to life.S&P data indicates that RMBS issuance in the US grew by 26 per cent in the March quarter to US$18 billion.However, local securitisation experts say that Australian activity will lag behind the bumper levels of last year. Erin Kitson, the director of S&P's local structured finance division said 2017 was an unusually hectic season for RMBS issues that was not likely to be matched this year."Compared to the last year mortgage securitisation activity has been a lot slower," said Kitson."We're still seeing deals coming to the market and we are expecting to see more issuances from non-bank lenders in the second half of the year."Chris Dalton, the chief executive of the Australian Securitisation Forum, also believes that non-bank lenders will step up issuance in the second half of the year, but overall securitisation volume will slow mainly because major banks are likely to remain on the sidelines."The favourable environment for senior and unsecured issues is keeping the major banks away," he said."The slowing of home loan growth driven by APRA's macro-prudential reforms is also contributing to dampened activity."Dalton noted there was little sign of Westpac reviving its participation in the RMBS market.Westpac is traditionally the most consistent securitiser of the major banks, but has not mounted a program since 2016.Despite the general slowdown, Dalton insists that the market remains healthy."There is no drop off in support from domestic and offshore investors," he said."Deals are still being upsized."Kitson said there was continuing interest in Australian RMBS issues from overseas-based institutional investors."We are still receiving a lot of queries from Japanese institutional investors in particular," she said.Dalton said the consensus expectations of a correction in the Australian property market were not deterring investors."Investors that buy mortgage backed securities understand that the programs have built-in protections that shield them against a severe decline in the property market," he said."Investors would become more concerned if unemployment began to increase and the RBA started to increase the cash rate."Australian Finance Group, which markets white label mortgages through its national network of home loan brokers, is expected to launch one of its largest RMBS programs early next month.Banking Day understands that AFG has mandated ANZ and NAB to engage with investors on a RMBS program earmarked for next week.