Sterling Overnight Interbank Average Rate (SONIA)

The Sterling Overnight Interbank Average Rate (SONIA) is a benchmark interest rate that reflects the average rate at which banks lend to each other overnight in British pounds. It is based on actual transactions and helps determine the cost of borrowing money in the short term. SONIA is commonly used in financial contracts, including loans and derivatives, to ensure fair pricing based on current market conditions. This rate plays a crucial role in the UK financial system, providing transparency and stability for both lenders and borrowers.