[zzleeper]

Most mortgages in the US are sold to Fannie and Freddy (government-sponsored enterprises) [1]. These GSEs in fact commit themselves to buy mortgages at a predetermined rate [2], and I suspect this rate is the main driver for the rates banks charge, at least for "qualifying mortages" (i.e. not jumbo loans and so on). In turn, I suspect the rates the GSEs offer depends on the rates at which the GSEs can finance themselves.

Now, who lends to these agencies (i.e. who purchases "agency MBS")? I couldn't find recent numbers, but this [3] FRBNY article from 2015 states that the Fed owns most of it, followed by banks (which buy agency mbs partly because it counts as a safe asset (a "high quality liquid asset"), and allows them to satisfy their liquidity coverage ratio requirements.

This leads me to your first point:

> Mortgage rates are, mostly, driven by the market.

Pre-2008, I would say probably yes, but nowadays I'm not entirely sure, as the govt. is the biggest buyer and plays a large role in the second-biggest buyer.

[1] http://www.freddiemac.com/singlefamily/factsheets/sell/frm.h...

[2] https://www.bankrate.com/rates/interest-rates/fannie-mae-30-...

[3] https://www.newyorkfed.org/medialibrary/media/banking/intern...