SONIA is an overnight rate, not a term rate.
A term rate provides borrowers with a known interest rate for the period of borrowing and therefore provides up-front certainty of the amount of interest due at the end of the interest period. Some borrowers may find this helpful for their cashflow forecast.
SONIA is an overnight rate, based on actual market rates and reset on a daily basis in arrears; this removes any expectation of future events inherent in a forward-looking term rate.
There is some industry discussion about the possibility of creating a forward-looking “term SONIA” rate. However, the potential scope of where such a rate may be preferable, the methodology for its creation, and the timing of its introduction, all remain uncertain. The advice from the FCA is that firms should not wait for, or rely on, the development of any potential term SONIA rate.