This whole area of interest only mortgage has been talked about a good bit in recent years. In my view the main reason being that people seem to have larger mortgages than in previous times, hence larger montly payments. By going interest only they obviously reduce monthly outgoings. No principal amount is paid. I inherently am not very comfortable with the idea, and feel that some level of principal should be paid back in regular payments (with a couple of exceptions).
Met a client a while back, and his views set me thinking. His view was this: Pay interest only, keep the lifestyle he wanted (ie big monthly personal spending). He intended to sell his house in 4-5 years. On selling, with the strong capital growth over the last few years, he should clear his debt, and give himself a decent deposit towards his new house purchase. I tried to argue the sensible view of paying of principal....but I am not sure he wasnt wrong! (in his circumstances)