What is SONIA? The benchmark that replaced sterling LIBOR
By SendPay Business · · 2 min read
SONIA, the Sterling Overnight Index Average, is the main benchmark interest rate for sterling. It measures the average rate banks and other large financial firms pay to borrow sterling overnight without security. The Bank of England publishes it every business day.
Why it replaced LIBOR
For decades, many loans and financial contracts were priced off LIBOR, a rate based on banks' own estimates of what they would pay to borrow. After a rigging scandal, regulators pushed markets to move to rates based on real transactions. SONIA, built from actual overnight deals, became the sterling replacement, and sterling LIBOR stopped being published.
SONIA vs the base rate
The Bank of England base rate, or Bank Rate, is the policy rate the Bank sets. SONIA is a market rate that usually sits just below Bank Rate and moves closely with it.
Where it is used
- Business loans and some mortgages priced as SONIA plus a margin.
- Interest rate swaps and other derivatives.
- Bonds with floating interest payments.
Where SendPay fits
SendPay does not offer loans or pay interest. It is software for launching your own branded money app with accounts, cards, transfers and payment links, powered by licensed partners.
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This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.