SONIA Rate Methodology

The SONIA (Sterling Overnight Index Average) rate methodology reflects the average interest rate at which banks in the UK lend unsecured funds to each other overnight. It is calculated daily using actual transaction data from a wide range of market participants, making it a robust indicator of the real cost of short-term borrowing. SONIA is administered by the Bank of England and is used as a benchmark for financial instruments, loans, and derivatives, providing transparency and stability in the financial system. Its methodology emphasizes accuracy, representing actual market activity without estimates or judgments.