By Sudip Kar-Gupta and Alistair Smout
LONDON (Reuters) - Britain's top equity index rose to a two-week high on Tuesday, with housebuilders helping the index higher after Taylor Wimpey (LON:TW) announced a special dividend payout to lead gains in the sector.
The blue-chip FTSE 100 index was up 0.3 percent at 6,167.77 points by the close, having hit its highest level since the start of May in early trade.
Taylor Wimpey was among top gainers, rising 4.7 percent after the company promised investors a larger payout than previously expected, underpinned by strong demand for property in Britain.
"Taylor Wimpey is clearly confident in its prospects given its very positive upgrade to financial targets and its dividend," said Laith Khalaf, senior analyst at Hargreaves Lansdown (LON:HRGV).
Rival housebuilding stocks also advanced, with Berkeley gaining 2.5 percent while Barratt Developments (LON:BDEV) advanced 2.4 percent.
Support services group DCC (LON:DCC) rose 3.1 percent after it said it expected to see more profit growth in the current financial year, having posted a 35.5 percent rise in full-year operating profit.
The FTSE remains down around 1 percent so far in 2016, and is 13 percent below its April 2015 record high, with world stock markets having lost ground since then due to concerns about a slowdown in China, the world's second-biggest economy.
Traders added that uncertainty ahead of next month's referendum on whether Britain should stay in the European Union was also curbing the near-term progress of the FTSE.
A new poll by TNS gave the "Leave" campaign a lead, which some traders said pulled the FTSE 100 off highs, although an ORB telephone poll showed the "In" campaign 15 percentage points in front.
Investors have slashed holdings of UK equities to the lowest level since November 2008 on fear Britons will vote next month to leave the European Union, a monthly survey by Bank of America (NYSE:BAC) Merrill Lynch (BAML) showed on Tuesday.
"I wouldn't be inclined to buy into the FTSE, this side of the referendum," said Horizon Stockbroking director Kyri Kangellaris.
Data also showed that British inflation slipped in April for the first time since September last year.