The banking giant has increased the rate for new customers while existing customers with the one-year fixed rate cash ISA will continue to receive 2.3%.

Savers will need a minimum £500 balance to open the ISA, and applications can be made in branch, mobile and online. If you have an ISA with an alternative provider (cash or stocks and shares ISA), Santander will accept transfers in.

As this is a fixed product so savers have to lock money away for a year, you can only access your cash if you close the account. But this is subject to 120 days’ loss of interest. After the year, savings will be placed into an easy access ISA Saver.

Its latest increase means it now leads the product category by some distance. Its nearest competitor is Castle Trust Bank’s offering of 2.67%.

Santander also tops the table in the two-year fixed rate cash ISA category, paying 3.25% (an increase from 2.8%), ahead of Hodge’s 3.17% offering.

Santander looking ‘to stand out’

According to Rachel Springall, finance expert at Moneyfacts, she “presumes Santander has made such a leap to stand out” as the ISA market is seeing rate improvements.

“Though it’s hard to tell at this stage how long the rates will remain on sale, or indeed are beaten”, she said.

Springall added: “Santander is a well-known brand, so it’s good to see it offering such attractive ISA rates to savers. This may encourage other brands to consider upping their rates but generally, it’s challenger banks and building societies that hold some of the most prominent positions in this sector.

“It is worth keeping in mind that there are higher rates on offer on fixed rate bonds, which sit outside of an ISA wrapper, and savers should consider their Personal Savings Allowance (PSA) which can protect their savings interest from tax.”

Separate data from Moneyfacts this week revealed fixed rate savings have climbed to a decade high, while ISAs have hit a nine-year peak off the back of six consecutive Bank of England base rate hikes since December 2021.

The top one-year fixed bond is from BLME paying an expected profit rate of 3.4%.