* Rise in Taylor Wimpey buoys housebuilding stocks
* But expected rate rise next year a risk to the sector
* FTSE seen challenging its record high this year
By Sudip Kar-Gupta
LONDON, May 13 (Reuters) - Britain's top share index briefly touched its highest level in more than 14 years on Tuesday, helped by a rally in housebuilding stocks, but then steadied.
The FTSE 100 was up by 0.3 percent, or 23.50 points, at 6,875.25 points after hitting 6,877 points early on, taking it past last year's peak of 6,875.62 points.
Traders were looking to see if the index could sustain a break-out above that level to put it within touching distance of its all-time high of 6,950.60 points set in December 1999.
Housebuilding shares, which have surged over the last year on the back of a booming UK property market, outperformed.
Barratt Developments rose 2.8 percent and Persimmon advanced 1.7 percent after smaller rival Taylor Wimpey said sales rates were at the upper end of its expectations, sending its shares up 5.7 percent.
Some analysts have said the sector's gains, which has seen the FTSE 350 Construction & Building Materials Index rise 30 percent since the start of 2013, may fade away on prospects of an interest rate rise in Britain next year.
"I'd be tempted to sell into any rallies on the housebuilder shares," said Beaufort Securities sales trader Basil Petrides.
Petrides expected the FTSE 100 to hit a record of 7,000 points at some time later this year but added the index had to first sustain a break past its May 2013 high of 6,875.62 points. The FTSE is up by around 2 percent since the start of 2014.
Hantec Markets analyst Richard Perry also said FTSE investors should not get too carried away in the near term, given the fact that the index had previously hit the 6,876 point level but then fallen back.
"We've made a few attempts to break past that May high from last year but we've failed, so one should not get too carried away just yet." (Editing by Susan Fenton)