By Paul Lewis
BBC Radio 4's Money Box
Icesave's Mark Sismey-Durrant said a guarantee underpins the offer
Foreign based banks are offering best buy no-strings savings and mortgage deals to UK customers.
Icesave - from Iceland's Landsbanki - pays 5.2% to savers with at least £250 who can run their account online and guarantees to pay more than the Bank of England base rate until October 2009.
Its closest competitor is also foreign - the ICICI Hi Save account pays 5.15% from the first £1, but the Indian bank only guarantees its rate until next December.
Lenders are also being challenged by the Dutch bank ING Direct whose new mortgage has no arrangement or exit fees, saving borrowers hundreds of pounds.
Icesave managing director Mark Sismey-Durrant told BBC Radio 4's Money Box about the rate commitment.
"We're promising that our rate of interest will be at least 0.25% above the Bank of England base rate until October 2009 and then at least at base rate for the next two years," he said.
And he denied that the rate would fall to the guaranteed level soon: "The objective is that anyone who opens an account is never disappointed by the rate of interest.
"The guarantee underpins what we're offering rather than a rate we're going to drop to."
The account does demand savings of at least £250, and withdrawals - which have to be done electronically from another account - must be at least £100 a time.
The foreign challenge to UK banks on savings has been extended to mortgages by Dutch group ING Direct.
It already offers a no-strings savings account paying 4.75% and has now launched a new variable rate loan for homebuyers.
Unlike almost all UK lenders, it does not charge an arrangement fee when the mortgage is taken out nor an exit fee when you leave. Typical costs for those fees are around £500 and almost £200.
Nor does it charge to transfer money to buy the property or administration fees on valuations.
However, the two year fixed rate mortgage it has also launched does make a £495 charge which chief executive Lindsay Sinclair says only covers its costs to fund the 4.95% deal.
"Our commitment is never to impose unnecessary fees," he told the programme.
"There are fees on our fixed rate mortgage but they represent the actual cost of fixing the funds at the fixed rate, and if the customer chooses to exit early, the actual cost of unwinding the arrangements."
All these foreign banks are covered by UK regulators, though ICICI does not yet subscribe to the Banking Code.
BBC Radio 4's Money Box was broadcast on Saturday 14 October at 1204 BST and will be repeated on Sunday 15 October 2006 at 2102 BST.