What is SOFR?
The Secured Overnight Financing Rate replaced LIBOR. Here's what it means for you.
SOFR — the Secured Overnight Financing Rate — is the cost banks pay to borrow cash from each other overnight, secured by U.S. Treasuries. It is the rate U.S. financial markets switched to after LIBOR was retired in 2023.
Why it matters to you
You will run into SOFR if you have an adjustable-rate mortgage, a student loan refinance, or any commercial product whose rate is described as "SOFR + X basis points." Your monthly payment moves with SOFR.
How it is set
The Federal Reserve Bank of New York publishes SOFR every business day at 8:00 AM ET. It is calculated from actual overnight Treasury repo trades — not survey estimates, which is what made LIBOR vulnerable to manipulation.
What "30-day average SOFR" means
Because the daily number jitters around quarter-ends and FOMC announcements, lenders often quote loans against the 30-day SOFR average. That smooths out the noise.
How to read it
- SOFR up → variable-rate loans get more expensive, savings accounts and CDs eventually pay more.
- SOFR down → the reverse, with a lag of weeks to months.
- The Fed's target range is the ceiling and floor. SOFR will rarely escape it.
If you are shopping for a savings account or CD and the rate quoted is meaningfully below SOFR, you are leaving yield on the table.