Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Strategy. Read the original article for full details.

FCA’s Mills Review Raises Compliance Bar for AI in Mortgage Sector

The Financial Conduct Authority (FCA) has published the Mills Review, a report examining the future of artificial intelligence (AI) in retail financial services. The review signals that while no new AI-specific rules are being introduced, the standards for evidencing compliance in the mortgage sector are set to become more demanding.

The Mills Review, led by FCA Executive Director Sheldon Mills, is described by the FCA as the first review of its kind by a financial regulator globally. It draws on 140 written submissions and a survey of over 5,000 UK consumers, exploring how AI could reshape retail financial services by 2030.

The report introduces three core frameworks: an AI Autonomy Spectrum, four expected system shifts by 2030, and seven priority recommendations for the FCA Board. The FCA concludes that the current regulatory framework remains sound, requiring only “progressive adaptation” rather than a complete overhaul.

For mortgage lenders, networks, and brokers, the key message is that existing regulations such as the Consumer Duty, the Senior Managers and Certification Regime (SM&CR), and operational resilience standards continue to apply. However, the way firms must evidence compliance is changing. The FCA notes that as AI systems take on more complex roles, it may become harder for firms to demonstrate consumer understanding, good outcomes, and clear accountability.

Under the Senior Managers Regime, accountability remains with named individuals, who will now need to implement stronger pre-deployment and ongoing checks to evidence the “reasonable steps” taken to oversee AI models, including those from third parties. The review states that one-off consent or basic file sampling will no longer be sufficient. Firms must be able to evidence what an AI did and why in every case, not just a sample.

The Mills Review also suggests that robust governance and auditability could become a competitive advantage for firms. The FCA highlights that firms able to demonstrate strong oversight and explainability of AI systems may be better positioned in the market.