UPDATE 1-Washington Mutual debt protection costs jump

(Adds details, updates price)

NEW YORK, March 6 (Reuters) - The cost to insure the debt of Washington Mutual Inc WM.N jumped to a new high on Thursday after Standard & Poor's cut its ratings on the largest U.S. savings and loan due to expectations of worsening mortgage loans.

WaMu's credit default swap spreads widened to 641 basis points, or $641,000 per year for five years to insure $10 million in debt, from 540 basis points at Wednesday's close, according to Markit Intraday. The swap had closed at 617 basis points on Jan. 9, its previous widest level.

Standard & Poor's earlier cut WaMu's counterparty credit ratings one notch to "BBB," the second-lowest investment grade, from "BBB-plus," and said it may cut it again.

The rating agency said it expects losses on residential mortgages to be worse than it had thought at the beginning of the year.

"Our overall view of the recessionary pressures in the economy is also now more negative," S&P said.

"We expect that this change in the external environment will push loan losses and loan delinquencies much higher than we previously factored into the WaMu ratings, which leads to a more negative view of WaMu's core earnings performance," the agency said. (Reporting by Karen Brettell; Editing by Dan Grebler)