if banks and finanfial entity paniced, which cause people to stop lending which leads to higher interest rate, how did the mortage rate stayed the same in 2008? it barely dropped. It's kind of confusing bc from what I heard, you can't control the interest rate banks would lend money at, but the mortage rate tracks 10 year treasury note. so which one does mortgage rate really track? bank's willingess to lend money? or 10 year treasury track? Don't fear and panics in financial crisis cause banks to stop lending money?
Mortgage rate data: FRED page.
The mortgage rate did move at various points in 2008, so the premise that they did not change appears incorrect. However, I can answer how they are priced.
The easiest way to view mortgage rates is that they track the rates of mortgages traded in mortgage-backed securities. The fair value of their yields depend on the riskiness (e.g., prime versus subprime), as well as implied volatility (since mortgages have embedded call options).
They are also spread products, and so the option-adjusted spread will widen in line with other risky bonds. As is well known, spreads widened in 2008 as a result of the Financial Crisis, as funding was withdrawn, there were forced liquidations, and the market makers themselves were viewed as risky.
The end result of this is that we cannot expect mortgage rates to track the 10-year Treasury, since it has no embedded options, and does not have a credit spread associated with it.