* FTSE 100 up 0.3 pct, but still below 6,900 level
* Miners rebound after rise in Chinese factory activity
* Property sector shrugs off disappointing mortgage data
* AstraZeneca advances after positive data on products
* Standard Life drops on reported UK pensions shake-up (Updates prices, adds quotes, broker comment)
By Sudip Kar-Gupta and Lionel Laurent
LONDON, June 2 Britain's top equity index inched higher on Monday as a strong Chinese factory report lifted mining stocks and as homebuilders shrugged off worse-than-expected mortgage approval data.
The blue-chip FTSE 100 index was up by 0.3 percent, or 18.77 points, at 6,863.36 points at 1040 GMT.
Mining stocks across Europe, including London-listed Rio Tinto and BHP Billiton, rose after data showed that Chinese factory activity expanded at its fastest pace in five months in May.
Mining stocks are particularly sensitive to the state of China's economy, since it is the world's biggest metals consumer. The sector fell on Friday on concerns about a possible economic slowdown there.
"Given that the (mining) sector has been pretty unloved recently, relating to ongoing concerns regarding Chinese growth, any bit of positive news on China will help," said Robert Parkes, equity strategist at HSBC.
The FTSE 350 Mining Index - which fell 16 percent in 2013 - was up 1.3 percent.
Homebuilder Barratt Developments also outperformed, rising 2.4 percent, after Goldman Sachs upgraded the stock to "buy" from "neutral".
Other property stocks like Wolseley and Hammerson also rose despite the news that British mortgage approvals fell more than expected in April to their lowest level in nine months.
Although the data pointed to signs that new rules on bank lending have taken some of the heat out of the housing market, analysts said this was also balanced by the expectation that policymakers would not rush to restrict money supply, as well as a robust UK PMI indicator for May.
British manufacturing activity kept expanding at a rapid pace in May, a survey showed on Monday, suggesting the economic recovery has lost little of its shine this quarter.
"We've had a fairly robust PMI indicator out of the UK this morning," said HSBC's Parkes. "That will help domestically focused stocks."
Pharmaceuticals group AstraZeneca, whose shares have lost ground over the last month after U.S. rival Pfizer walked away from its bid, saw its shares rise 1.3 percent after the company got positive data for two of its products.
On the downside, shares of insurer Standard Life fell 2.5 percent after press reports said a move to a collective pensions system would be formally put on the UK legislative agenda later this week.
"The thinking is that the government will introduce collective pensions, as they have in the Netherlands, whereby pensions money is pooled and this brings charges down," said Edward Houghton, analyst at Sanford C. Bernstein. "Ultimately, people are thinking margins are coming down on pensions."
The FTSE 100 has risen by nearly 2 percent since the start of 2014, and hit a peak of 6,894.88 points last month, which marked the index's highest level since December 1999.
However, some traders said the FTSE remained prone to short-term pull-backs if it continued to fail to break above the 6,900 point level in order to challenge a record 7,000 point target.
"I'm still concerned that the FTSE has not broken out above the previous highs yet," said Hantec Markets analyst Richard Perry. (Editing by Louise Heavens and Toby Chopra)