Your grandfather is surely much better off than if he had been renting that house all those years. He would also have paid a huge total amount (to a landlord) and wouldn't have any share in the appreciation of his house value. He also probably has better security of tenure (a landlord could have decided to evict him and sell the property when the price went up).
Yes, interest only loans only benefit one party: the banks. And they preyed on financially illiterate people for their profits. All while reaping bonuses and then getting bailed out in 2008.
The government is not killing NHG, though.
Even my grandfather, who bought his house for 75.000 guilder and is now 83 still has outstanding debt due to this system of interest only mortgage. He's lucky that he can sell his house at a huge profit if he wants to live in a care home, but I am sure the bank earned what he borrowed and then some over his lifetime.
Also the fact that the government is killing the NHG is infuriating, they know damn well that housing is too unaffordable for young people to qualify anymore.