Just when the outlook for the nation’s domestic finances seemed as it couldn’t get any worse – it has. On top of fears that one million or more ‘zombie households’ face instant insolvency the moment interest rates return to normal comes new research today uncovering a sub-category of ‘super-zombies’. These specimens of the financially undead are households unable to pay what they owe, even if interest rates stay where they are. More than one million households have interest-only mortgage debt totalling £120 billion on which they are currently on course to default.
Some have no investment plan of any sort to pay off the capital sum. About 700,000 mortgages are in this position, with a value owed of about £75 billion.

Some have a plan that on current form will be unable to clear the debt. About 400,000 mortgages fit this description, with a total owed of £45  billion. The message from today’s report, by research consultancy BDRC Continental and published exclusively by Financial Mail, is that 1.1 million households are in effect hoping for the best. Not only that, but the option of simply selling the property for a big capital gain is not the tried and trusted solution that it once was, given the subdued state of the UK housing market. Zombie households are made up of those individuals and families who are barely keeping afloat financially and who would slip beneath the waves were the current level of interest rates – the lowest in more than 300 years – to return to anything like normal.....Read more here