SONIA Rate Explained: Meaning, Today's Rate & GBP Loans

What Is SONIA?

SONIA - the Sterling Overnight Index Average - is the benchmark interest rate for British pound (GBP) lending and derivatives markets. It measures the average rate banks and other financial institutions pay to borrow sterling overnight on an unsecured basis, and it is administered by the Bank of England.

Like SOFR in the US and the euro short-term rate (ESTR) in the eurozone, SONIA is a "risk-free rate" (RFR): it is based on actual transaction data rather than the expert bank estimates that underpinned LIBOR, making it far more resistant to manipulation.

SONIA itself isn't new - it was first introduced in 1997 by the Wholesale Markets Brokers' Association. The Bank of England took over as administrator in April 2016 and reformed the methodology in April 2018 to broaden the underlying transaction data and bring it in line with international benchmark standards.

How Is SONIA Calculated?

The Bank of England calculates SONIA each London business day using a defined process:

Data collection - Banks report details of the previous day's eligible sterling overnight transactions by 7:00 AM.
Validation - The Bank checks the data for completeness and runs plausibility checks.
Calculation - SONIA is computed as the trimmed, volume-weighted mean rate of unsecured overnight sterling transactions where banks and other financial institutions borrow from other financial institutions and non-bank counterparties (such as money market funds and insurers).
Publication - The rate is published on the following London business day.

Because it draws on a broad set of unsecured overnight deposits rather than a single narrow market segment, SONIA is designed to reflect genuine, robust trading activity across sterling money markets. The Bank of England reports that SONIA underpins the valuation of roughly GBP 30 trillion of assets each year and is referenced in tens of trillions of pounds of new derivative and loan transactions annually.

SONIA vs GBP LIBOR

Feature	SONIA	GBP LIBOR
Basis	Unsecured overnight interbank/institutional borrowing	Unsecured, panel-bank estimated
Source	Actual transaction data	Expert judgment / estimated quotes
Term structure	Overnight only; no forward-looking term rate in general use	Built-in (1M, 3M, 6M, 12M)
Day count	Actual/365 (fixed)	Actual/365 (fixed)
Availability	Published the next business day	Set at the start of the interest period
Credit component	None (risk-free)	Embedded bank credit risk

Sterling LIBOR panels ceased publication at the end of 2021, and synthetic GBP LIBOR settings were fully retired shortly after - sterling markets moved to SONIA well ahead of the US dollar's LIBOR transition, which wasn't completed until 30 June 2023. The Bank of England's Working Group on Sterling Risk-Free Reference Rates formally recommended SONIA as the successor to GBP LIBOR.

SONIA vs SOFR

SONIA and SOFR are both risk-free overnight rates, but they benchmark different currencies and are built differently:

Feature	SONIA (GBP)	SOFR (USD)
Currency	British Pound Sterling	US Dollar
Administrator	Bank of England	Federal Reserve Bank of New York
Basis	Unsecured overnight interbank/institutional borrowing	Secured (Treasury repo collateral)
Day count	Actual/365	Actual/360
Term rate	No widely-used forward-looking term rate	Term SOFR widely used for business loans
Compounded index	SONIA Compounded Index (since August 2020)	SOFR Index (since March 2020)

The practical takeaway for borrowers comparing GBP and USD facilities: SONIA is unsecured and uses an Actual/365 day count, while SOFR is secured and uses Actual/360 — so the same nominal rate doesn't translate directly between the two currencies. See our full guide to SOFR for the USD side of the comparison.

How SONIA Is Used in Loans

Unlike Term SOFR in the US, the sterling loan market largely settled on Compounded SONIA in arrears rather than a forward-looking term rate. The Working Group on Sterling Risk-Free Rates published detailed recommended conventions for GBP loans, which the market has broadly adopted:

Day count convention: Actual/365 (fixed) - consistent with historical sterling market practice, and different from the Actual/360 convention used in USD SOFR and euro STR markets.
Lookback: A 5 banking-day lookback without observation shift ("rate shift, not weight shift") - each day's interest accrues at the SONIA rate observed five business days earlier, while still being weighted against its actual calendar position in the interest period.
Compounding: Daily SONIA rates compound over the interest period, so total interest is only known close to the end of the period, similar to compounded SOFR.
SONIA Compounded Index: Since 3 August 2020, the Bank of England has published a compounded index value alongside daily SONIA, which market participants can use to simplify compounded-interest calculations without needing to compound each daily fixing by hand.

This compounded-in-arrears approach became the sterling market standard well before US markets settled on their own conventions - a December 2021 central counterparty conversion process moved more than GBP 13 trillion of cleared sterling swap contracts from LIBOR to SONIA in a single exercise.

Where SONIA Stands Today

The Bank of England's Monetary Policy Committee has held Bank Rate at 3.75% through its March, April, and June 2026 meetings, with the most recent decision - a 7-2 vote to hold, at the 17 June 2026 meeting - reflecting a still-cautious committee amid above-target inflation pressures. SONIA has tracked closely around that level, trading near 3.7% in early July 2026. The MPC's next scheduled decision is 30 July 2026.

Because SONIA is a nearly risk-free overnight rate, it typically sits very close to Bank Rate, with only small variations driven by short-term supply and demand in sterling money markets.

Key Dates

1997 - SONIA is introduced by the Wholesale Markets Brokers' Association
April 2016 - Bank of England becomes SONIA's administrator
April 2018 - Bank of England reforms SONIA's methodology
3 August 2020 - SONIA Compounded Index publication begins
31 December 2021 - GBP LIBOR panels cease; sterling markets complete transition to SONIA

Frequently Asked Questions

What does SONIA stand for? SONIA stands for the Sterling Overnight Index Average — the GBP benchmark interest rate administered by the Bank of England.

What is today's SONIA rate? See our current & historical SONIA rates page for the latest published rate and an interactive chart, updated daily straight from the Bank of England. You can also check the Bank of England's SONIA page directly, or use our RFR Loan Calculator to run a loan calculation with up-to-date rate data.

Where can I find historical SONIA rates? Our rates page has an interactive historical SONIA chart back to its reformed 2018 methodology, sourced directly from the Bank of England. The SONIA Compounded Index lets you derive a compounded average rate between any two historical dates, and our RFR Loan Calculator generates a full daily rate ledger for whatever historical loan period you enter, exportable to Excel.

What is the difference between SOFR and SONIA? SOFR is the US dollar risk-free rate (secured, Actual/360 day count, administered by the NY Fed); SONIA is the British pound risk-free rate (unsecured, Actual/365 day count, administered by the Bank of England). See the comparison table above, or our full guide to SOFR, for details.

Did SONIA replace LIBOR? Yes, for sterling markets. GBP LIBOR panels ceased publication at the end of 2021, and the Bank of England's Working Group on Sterling Risk-Free Reference Rates formally recommended SONIA as the replacement — sterling markets completed their transition well ahead of the USD LIBOR-to-SOFR transition, which finished on 30 June 2023.

Calculate Your SONIA Loan

Use our free RFR Loan Calculator to calculate interest on any SONIA-based loan - compounded in arrears with the standard 5-day lookback and Actual/365 day count - with a full daily rate ledger and Excel export.