You are right, some people shouldn't have been buying a house but some people don't have a choice.

The first time I knew of the existence of "interest only mortgages" was when I had a neighbor that was a full-bird colonel in the Air Force stationed at McConnell AFB here in the Wichita area. After serving here for two years, including 9 months worth of TDY to Afghanistan and Iraq, he was transferred to the Pentagon in 2005. While living here in Kansas his family was able to afford a 2400 square foot house, which is pretty common, and his wife was able to be a "stay home mom" on his salary and housing allowance alone. When they went to Washington to look for housing they got quite a shock! There were NO suitable rentals in the area to be found, astronomical house prices in the DC area proper, and there was a one year waiting list for military housing in the area. Since he was only expected to be there for a year to 18 months they ended up buying a house 60 minutes south in Virginia that was half the size of their house in Kansas and cost almost three times as much. His wife had to go back to work in the IT field and the only mortgage affordable to them was an interest only loan. They ended up being there for only one year so I am assuming that they were able to get out from under the house. I would imagine that there are quite a few others who are in the same boat of being transferred into an area with expensive housing and few suitable alternatives.

Cheers,
Bill