This is a reduction of 0.2 per cent from 1.5 per cent and will see the odds of each £1 bond number winning a prize change from 24,000 to 1 to 26,000 to 1.
Premium bonds are a form of savings where investors forgo interest in favour of winning a tax-free prize sum.
The rate cuts means the total number of prizes drop from 1.9m to 1.7m. The total value of prizes decreased from £57m in July to £49m in August.
From August there will only be three chances to win £100,000, down from five, and six chances to win £25,000, down from nine.
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For smaller amounts, there will be 11,891 chances to win £100 or £50, down from 33,552 in July.
NS&I said the change reflected market trends and ensured NS&I balanced the interest of savers, taxpayers and stability of the financial services sector.
Jane Platt, chief executive of NS&I, said: "Rates across the savings market have fallen over recent months, resulting in NS&I savings being increasingly attractive.
"To ensure we stay within our net financing target – and in light of our framework to balance the needs of our savers, taxpayers and the stability of the broader financial services sector - we now need to reduce the Premium Bond prize fund rate."
NS&I's net financing target for 2013/14 is £0 with a range of -£2bn to £2bn.

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