Santander launches inflation-beating fixed-rate ISAs amid cash ISA boom

Santander has launched a new range of fixed-rate cash ISAs paying inflation-beating rates.

With potential base rate cuts next year and changes to the ISA rules, fixed-rate savings accounts could offer an opportunity to lock in rates now for those with short term savings goals.

From the tax year 2027/28, the annual cash ISA allowance will be reduced from £20,000 to £12,000 for under-65s.

Santander’s fixed cash ISA range includes one, two, three and five-year accounts offering interest rates of up to 4.7% annual equivalent rate (AER).

The one and two-year ISAs pay 4.5% AER and the three and five-year ISAs pay 4.65% and 4.7% AER, respectively.

Analysis by Paragon Bank shows fixed and instant-access cash ISA balances grew by £38 billion to £478 billion across 25.6 million accounts between January and May.

Who can open Santander’s new fixed ISAs?

You can open an account if you’re 18 or over with a minimum deposit of £500.

Interest is paid into the accounts annually and at the end of the term. Deposits for the 2026/27 year must be made by the end of 30 September 2026.

You can withdraw money from the ISAs, but you must take out the entire balance and you’ll be charged a fee equal to 120 days’ interest.

Can I transfer an old ISA into Santander’s ISAs?

If you have an ISA elsewhere with a much lower rate, and are happy to lock money away for a few years, then it is possible you can transfer it into one of Santander’s new fixed deals.

Just ask the provider for the correct form so that you do not lose the tax free status of the savings.

Santander said it will also pay a hotel voucher of up to £400 when transferring in.

Santander will email you a link and registration code within 28 days of your ISA transfer completing which you need to activate within 60 days to receive the voucher(s). O

It is worth noting that some providers are also paying up to £1,500 cash bonuses when transferring into a stocks and shares ISA.

How do Santander’s cash ISAs compare to the rest of the market?

Based on a deposit of £500, none of Santander’s fixed-rate cash ISAs are top of the market, but only by a small amount.

All four are also paying the highest rates out of the major high street banks, if you prefer a bank with an established name.

If the very top rate is your priority, then the one-year fixed-rate cash ISA can be beaten by Cynergy Bank paying 4.7%.

The two-year fixed-rate cash ISA by Cynergy Bank pays 4.75%. Coventry Building Society has a two-year fixed-rate deal paying 4.63%.

Its three-year fixed-rate deal is beaten by Tandem Bank, paying 4.78%. Meanwhile its five-year fixed-rate cash ISA can be beaten only by Hinckley & Rugby Building Society (4.82%).

Though, if you have a large sum and do not think you need it for five years or more, investing it could make better sense.