A degree of risk is priced into the interest rate. I still have a fiduciary duty to my lenders to not take undue, undisclosed risks. In practice, people get away with this except in the most egregious cases, but that doesn't make it less wrong.
Worse, systemic risk isn't priced into the interest rate, because the government tends to bail out the banks.
Everyone using leverage and betting on things going up forever is a really big part of how you get 2008. A lot of people made a ton of money in the run-up to 2008 (privatized profits); the population as a whole paid the costs (socialized losses).
edit: I wrote "borrowers" above when I meant lenders.
The moral hazard comes into play when the risk is forced on some unwitting bystander.