Note: Calculation assumes the "Actual/365" day count convention standard for GBP SONIA markets.
function calculateSoniaInterest() {
// 1. Get DOM elements
var principalInput = document.getElementById('soniaPrincipal');
var rateInput = document.getElementById('soniaRate');
var marginInput = document.getElementById('soniaMargin');
var startDateInput = document.getElementById('startDate');
var endDateInput = document.getElementById('endDate');
var resultsDiv = document.getElementById('soniaResults');
// 2. Parse values
var principal = parseFloat(principalInput.value);
var soniaRate = parseFloat(rateInput.value);
var marginBps = parseFloat(marginInput.value);
var startDateStr = startDateInput.value;
var endDateStr = endDateInput.value;
// 3. Validation
if (isNaN(principal) || principal <= 0) {
alert("Please enter a valid Principal Amount (£).");
return;
}
if (isNaN(soniaRate)) {
alert("Please enter a valid SONIA Rate (%).");
return;
}
if (isNaN(marginBps)) {
marginBps = 0; // Default to 0 if empty
}
if (!startDateStr || !endDateStr) {
alert("Please select both a Start Date and an End Date.");
return;
}
// 4. Date Calculation
var start = new Date(startDateStr);
var end = new Date(endDateStr);
// Calculate time difference in milliseconds
var timeDiff = end.getTime() – start.getTime();
// Convert to days
var daysDiff = Math.ceil(timeDiff / (1000 * 3600 * 24));
if (daysDiff <= 0) {
alert("End Date must be after Start Date.");
return;
}
// 5. Rate Logic
// Convert Basis Points to Percentage (1 bp = 0.01%)
var marginPercent = marginBps / 100;
var totalRatePercent = soniaRate + marginPercent;
// 6. Interest Formula: Simple Interest based on Actual/365 convention
// Interest = Principal * (TotalRate% / 100) * (Days / 365)
var interest = principal * (totalRatePercent / 100) * (daysDiff / 365);
var totalAmount = principal + interest;
// 7. Formatting Output
// Helper for currency formatting
var formatter = new Intl.NumberFormat('en-GB', {
style: 'currency',
currency: 'GBP',
minimumFractionDigits: 2,
maximumFractionDigits: 2
});
document.getElementById('resDays').innerText = daysDiff + " days";
document.getElementById('resEffectiveRate').innerText = totalRatePercent.toFixed(4) + "%";
document.getElementById('resInterest').innerText = formatter.format(interest);
document.getElementById('resTotal').innerText = formatter.format(totalAmount);
// 8. Show Results
resultsDiv.style.display = "block";
}
Calculating Interest with SONIA (Sterling Overnight Index Average)
The transition from LIBOR to Risk-Free Rates (RFRs) has made the Sterling Overnight Index Average (SONIA) the primary interest rate benchmark for GBP financial markets. Unlike forward-looking term rates, SONIA is a backward-looking, overnight rate based on actual transaction data. This calculator helps borrowers, lenders, and financial analysts estimate interest costs using the standard GBP day-count conventions.
What is SONIA?
SONIA stands for Sterling Overnight Index Average. It is the effective overnight interest rate paid by banks for unsecured transactions in the British sterling market. It is administered by the Bank of England and serves as the robust, risk-free alternative to LIBOR.
How is SONIA Interest Calculated?
Calculating interest on a SONIA-linked loan differs from fixed-rate loans. Because SONIA is an overnight rate, interest is typically calculated using a compounding methodology over the interest period. However, for estimation purposes, an annualized average rate can be applied to the principal.
The standard formula used for GBP markets is the Actual/365 day count convention:
SONIA Rate: The annualized average or compounded index rate for the period.
Credit Spread: A margin added by the lender, typically expressed in Basis Points (bps).
Day Count: The actual number of days in the accrual period divided by 365 (unlike the US dollar standard of 360).
Understanding Basis Points (bps)
In professional financial markets, margins are quoted in basis points. This calculator allows you to input the spread directly in bps to ensure accuracy.
100 bps = 1.00%
50 bps = 0.50%
25 bps = 0.25%
Backward-Looking vs. Forward-Looking
One of the key challenges with SONIA is that the exact interest amount is often not known until the end of the interest period (since daily rates fluctuate). This calculator is designed for:
Retrospective Calculation: Verifying interest payments on past periods using known average rates.
Forecasting: Estimating future costs by assuming a static or projected SONIA rate.
SONIA vs. Base Rate
Feature
SONIA
BoE Base Rate
Determination
Market transactions (Overnight)
Set by Monetary Policy Committee
Risk Component
Near Risk-Free
Policy Rate
Usage
Commercial derivatives, floating rate notes, large corporate loans
Consumer mortgages, savings accounts
Why use 365 days?
While the US Dollar and Euro markets often use a 360-day year (Actual/360) for money market calculations, the Sterling (GBP) market traditionally uses a fixed 365-day year (Actual/365 Fixed). This calculator adheres to the Sterling convention to ensure the output matches official bank settlements.