What would Mortgage Rates Be Without Government Aid?

Seeing that mortgage rates are at an all time low.  I started wondering what the rates would be without the government intervention, that we have slowly become accustomed to.  

Rates are currently sittting at around 5%, and their sister rate, the Certificate of Deposit is currently hovering around 2% for a one year term.  A clear push by the government to move into the risk assets.  A push that is starting to work.  

There is little doubt that interest rates will rise with inflation over the next couple of years, as we come out of this black hole.  The question is how high will they rise?  Julian Robertson and Bill Gross appearing on CNBC in January hinted at rates rising about 10% over the next couple of years (say 3-5).  This would create a once in a lifetime shot to lock in Treasury's with oustanding rates and low risk.  But, like the 70's very few people will take advantage of this.  

If interest rates do rise to the levels predicted by Gross and Robertson, China will not be happy. This will force teh government to likely intervene to bring down rates, by purchasing Treasuries in bulk.  But, even with the purchases, the interest rates might be unstoppable, given the amount of money that has been poured into the economy in the past year.  

Now back to mortgage rates.  Where would mortgage rates be, without the government intervention?  Mortgage rates need to reflect the risk of the lender.  Risk is at an all time high, with foreclosures, declining credit scores, and the unemployment surge.   

This storm of risk, would likely create a rate in excess of 7%.  Probably in the range of 7.5% to 9%.  Evidence of this is in the spike that occurred in rates around June of last year.  Without the government stepping in the spike may have continued.  Clearly this would not be a spike based on inflation, but rather extreme risk and even deflation. 

This type of interest rate (higher than 7%) would have further harmed the economy and forced even more damage to the American Dream.  So, looking back, government intervention is probably a good thing at this stage (stating the obvious).