Don't lenders make some assumptions about a borrowers behavior when they decide what loan offers to make?

I doubt it. I think they are probably just presenting a range of options for borrowers to pick from. Limited by a few things: Don't make the rebate too large, so as to avoid fraud. (Typically they won't let the borrower walk away with cash, so the max rebate is generally not much bigger than the total costs & fees.)
Don't let the rate get too far below the market rate, because that requires so many points that borrowers won't go for it. Granularity of the interest rates is 0.125%.

I suspect that the lender's biggest assumption is that the borrower taking a rebate will keep the loan long enough so that they can recover the outlay. I once refi'ed 2 months after my previous refi closed, and the mortgage broker called to find out why. If it was because I unexpectedly sold the house, they were okay with that. Annoyed, but ok. If it was because I did a new refi at a lower rate (which it was!), the broker had to cough up their fees & commission back to the lender. [Being a nice guy, I said it was because I unexpectedly sold the house.)
The next time I refi'ed, a couple of years later, the broker said, "Do me a favor---don't refi again for at least 6 months."

Choosing a higher rate loan with a large rebate is making a bet that you will hold the loan for a shorter time period than the lender assumes. Choosing a lower rate loan with high points is making the bet that you will hold the loan longer than the lender assumes.

The lender doesn't really "assume" anything. Like an insurance company, they don't make assumptions about individual customers. They have experience with thoussands & millions of loans, and know what the statistics are -- X% of the mortgages will be paid off in Z years, Y% in W years, etc. SO they don't care or assume what you do.

But you, OTOH, only get one mortgage at a time, so you very much care about the shape of your loan, and you probably have a pretty good idea of how long you'll be in the loan. At least, you have a good idea of how long you *intend* to have the loan.

JAFO was saying is that a 7-year break-even period is too long for his comfort. That its too far in the future to reliable know whether it is a good bet to make.
Me, too. And I think that the more experience you have, the shorter period you'll accept for break-even.

As an example, we bought this house in 2006, and we will be in this house until the mortuary picks up our corpses. Yet, we've refi'ed several times. Every time the rates drop enough, I refi. We've refi'd 4 times. 5 mortgages in 6 years, that's a loan length average of 1.2 years.

We were in our previous house 5 years, and refi'ed 3 times. That's an average loan lifetime of 1.25 years.

Point is, you may plan to stay in the house for decades, and not really plan to refi. But you don't know when rates may drop enough to make it worthwhile to refi. My shortest loan was 2 months before the next refi. If I had paid points on the first one, even with a 4-5 year break-even, all that cost would have been wasted.

After we closed the 3rd loan, at 5.875%, I spoke to the broker and told to her to call me when rates dropped to 5.125% and I'd refi then. We both laughed and agreed that zero-points rates would NEVER get that low. Joke was on us. My next 2 refi's were at 4.875% and 4.000%. All were true no-points, no-cost mortgages.

Heck, you may plan to stay 8 years, so you're fine with a 5 year break-even. But life happens and can change your plans. Job change, spouse change, etc. can happen at any time. The younger you are, the more likely it is that your plans will be disrupted by events outside of your control.