Britain's FTSE edges up as housebuilders rise, miners lag

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* FTSE 100 up 0.1 pct

* Miners down on firmer dollar

By Kit Rees

LONDON, Aug 22 (Reuters) - British shares edged higher on Monday, led by a rise in housebuilding stocks, with gains capped by a fall in the mining sector.

The blue chip FTSE 100 index advanced 0.1 percent to 6865.87 points by 0906 GMT, having posted its steepest weekly loss since mid-June on Friday.

The index lagged its European peers after a fall in the mining sector, which extended losses to trade 2.9 percent lower on the back of a resurgent dollar, which makes dollar-denominated commodities more expensive for holders of foreign currencies.

The dollar has gained on increased bets that U.S (Other OTC: UBGXF - news) . Federal Reserve could raise interest rates before the end of this year, following hawkish comments from Fed officials ahead of this week's global gathering of central bankers in Jackson Hole.

The strong dollar hit the price of gold in particular, pushing it down to two-week lows and weighing on shares of precious metals miners Fresnillo (Other OTC: FNLPF - news) and Randgold Resources , which dropped 6.1 percent and 5 percent respectively. Likewise, mid-cap Hochschild fell 6.7 percent.

UK housebuilders Taylor Wimpey (LSE: TW.L - news) , Barratt Developments (LSE: BDEV.L - news) and Berkeley Group were the top gainers, up between 1.5 to 2.4 percent.

They fell heavily following the UK's vote to leave the European Union in June. They have since risen off 2016 lows but have yet to break above their pre-Brexit levels.

"On the one hand you've got the possibility of an economic downturn, but equally you've got really low mortgage rates, and you also have a very large imbalance in the supply and demand of housing ... and that's going to help support property prices," Laith Khalaf, senior analyst at Hargreaves Lansdown (LSE: HL.L - news) , said. (Reporting by Kit Rees; editing by John Stonestreet)