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What is SONIA? The benchmark that replaced sterling LIBOR

By SendPay Business · · 2 min read

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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.

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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.

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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.
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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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How it works

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SendPay Business is a technology company, not a bank. Accounts, cards and payments are powered by licensed partners.

Questions people ask

How much interest does a SONIA plus margin loan cost?

Enter the balance, SONIA, the margin and the days in the free calculator.

SONIA interest calculator →
What is the central bank base rate?

The policy rate SONIA tracks closely.

Base rate →
How do interest rates affect exchange rates?

Why rate changes move currencies.

Rates and currencies →
Can I launch my own money app?

Yes, with accounts, cards and payments.

See platforms →

Read next

Spotted a mistake or something out of date? and we'll fix it. How our guides are made

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. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.