TORONTO, Oct 10 (Reuters) - Toronto-Dominion Bank (TD.TO: Quote, Profile, Research) said on Friday it will lower its prime lending rate to 4.35 percent, the second cut to prime it has made this week, citing the benefits of a federal government plan to buy additional residential mortgages from financial institutions.

TD Canada Trust, the bank's domestic unit, said it will lower its prime rate by 15 basis points to 4.35 percent, effective next Tuesday. Monday is the Canadian Thanksgiving holiday.

It is the first of the big chartered banks to make the move, and other Canadian banks are likely to follow, if past patterns hold.

TD said the government's plan to buy C$25 billion ($21 billion) in insured mortgage pools should help lower its costs. Banks have seen wholesale funding costs jump in recent months due to the credit crisis.

"We believe that this initiative will be put into effect in a way that will reduce our overall cost of funds," Tim Hockey, president and CEO of TD Canada Trust, said in a statement.

"Financial markets are very turbulent, and funding costs are still high. However, we anticipate that our cost of funds will decrease with the implementation of this program, and therefore wanted to take action that will benefit our customers directly."

($1=$1.19 Canadian)

(Reporting by Lynne Olver; Editing by Ka Yan Ng)