UPDATE 3-Lloyds takes 500 mln stg hit on mortgage mishap

* To book 500 million pound ($811 million) provision

* Settles with FSA regulator over mortgage complaints

* Lloyds shares close down nearly 4 percent

* Lloyds stock is worst performer on FTSE 100 index (Updates with closing share price, further detail)

By Sudip Kar-Gupta

LONDON, Feb 21 (Reuters) - Part-nationalised British bank Lloyds (LLOY.L) will take a 500 million pound ($811 million) provision after agreeing to repay 300,000 customers following confusion over the rates being offered at some of its mortgages.

Lloyds, the UK's biggest retail bank, said it had reached a voluntary agreement with the Financial Services Authority regulator over initiating a customer review and contact programme following the concerns over the mortgages.

Lloyds said the settlement related to mortgage customers of its Halifax unit, where the wording in certain mortgage offer documents had the potential to cause confusion.

Lloyds' Halifax division said it would write to around 600,000 customers from April onward to clear up the confusion and make goodwill payments to some 300,000 of those customers.

Lloyds acquired the Halifax business following its purchase of rival HBOS during the height of the credit crisis in 2008.

The HBOS takeover, which was brokered by the then Labour government, saddled Lloyds with billions of pounds of losses and led the British government to step in and bail it out with taxpayers' money.

As a result of the bailout, the British government ended up with a stake of around 41 percent in Lloyds.

Lloyds shares fell 3.97 percent to 66.55 pence, the worst performing stock on Britain's benchmark FTSE 100 index .FTSE.

Lloyds underperformed a 1.1 percent fall in the FTSE 100 and a 2.7 percent drop in the European banking sector .SX7P.

Shares in rival part-nationalised bank Royal Bank of Scotland (RBS.L) also fell sharply. RBS ended down 3.9 percent.

RBS and Lloyds report full-year results later this week, and both banks are expected to be hit by their exposure to Ireland's economic problems and by bad debt charges. [ID:nLDE71G19O] ($1=.6163 Pound) (Editing by Will Waterman; Editing by Theodore d'Afflisio)