National Savings & Investments will cut interest rates for the second month in a row today after significant falls in the return on gilt yields.

The government-backed savings institution, which enjoyed a jump in customer numbers after the run on Northern Rock, will cut fixed rates on certificates and bonds by up to 0.65 per cent, after reducing rates by as much as 0.6 per cent this time last month.

Advisers said that the move “could be seen as taking advantage of customers looking to NS&I for 100 per cent security” in light of Northern Rock’s troubles, as fixed rates typically attract savers seeking a risk-free investment.

The cuts are the biggest since October 2002. In the past month, gilt yields have fallen by 61 points on 12-month gilts and by 59 points on 36-month gilts.

The National Savings & Investments (NS&I) cuts come despite the Bank of England maintaining the base rate at 5.75 per cent since July and make its fixed-rate deals some of the worst in the savings market.

The cuts, which will apply to new investments in ten bonds and savings, come after thousands of former Northern Rock savers flocked to NS&I seeking a safe haven. Sales of NS&I savings were “roughly 20 per cent higher” than average towards the end of September and throughout October, the institution said.

Susan Hannums, of AWD Chase de Vere, the independent financial adviser, said: “It could be seen to be taking advantage of customers looking to NS&I for 100 per cent security. However, with indications pointing to a cut in the Bank of England base rate in the coming months, it does not surprise me. NS&I’s rates have gone from bad to worst.”

Gill Stephens, for NS&I, said: “Market conditions in 2007, which have included Bank of England base-rate rises of 1 per cent, higher-than-expected inflation and uncertainty in financial markets, have resulted in NS&I’s products being more popular than expected. Our sales have been higher also partly as a result of Northern Rock’s experience and the flight-to-safety effect.”

There is no change to NS&I variable rate deals, which are linked to the Bank of England base rate.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax