The Sex Pistols star told BBC 6 Music that he has been forced to come up with lyrics as he goes along in new recording sessions for Public Image Ltd.
Lydon said: "Ever since we had that silly little house fire, all my lyrics got burnt down so I had to start again from scratch trying to remember ideas but it's much more enjoyable this way.
"I like the panic and the fear of going in there live and having to come up with something. It's a really, really exciting environment we've put ourselves in."
Lydon added of working in the studio provided by musician Steve Winwood: "It's a barn - there's nothing too flash but then we don't need flash, over-the-top electronica. We're a live band, and we record live, we play and if you can't play it live then don't be recording it. This is PiL.
"It's got that anti-studio vibe which we love. Stone walls is the order of the day. I've loved stone walls ever since the early PiL albums. I love the resonance the drum kit can achieve in a stone-built environment. It makes for great, exciting-sounding records without electronic gadgetry and trickery."
Lydon had previously suggested that PiL would release a new album before the end of 2010 but the death of his step-daughter Arianna 'Ari-Up' Forster delayed the reunion plans.
> John Lydon: 'I'd write new Sex Pistols songs'
Listen to the BBC 6 Music interview with John Lydon below: