* FTSE 100 down 0.2 pct
* BT drops on fears over jump in pension deficit
* Housebuilders extend falls on UK rate hike jitters
By Tricia Wright
LONDON, June 16 (Reuters) - Britain’s top share index slipped on Monday as concerns about a large increase in its pension deficit hit BT Group, while housebuilders extended their recent sell-off on prospects of a UK rate hike.
BT fell 2.4 percent, the most in the FTSE 100. Traders cited a Sunday Times report which said that a three-yearly review of the telecoms firm’s 319,000-member pension scheme next month was likely to show a 50 percent jump in the deficit to about 6 billion pounds ($10.1 billion).
This would force BT to increase its contributions and potentially reduce its firepower in its fight with BSkyB over sports broadcast rights, the newspaper said. Traders, however, shrugged off the share price weakness.
“We see this as an overreaction and argue that (6 billion pounds) is too high. The investment case for BT remains strong and we see this as a good entry point into a company that has the opportunity to reward patient investors,” said Atif Latif, director of trading at Guardian Stockbrokers.
BT knocked the most points off the FTSE 100, down 14.61 points, or 0.2 percent, at 6,763.24 points by 1510 GMT.
Housebuilders weakened further on comments from Bank of England Governor Mark Carney last week that mortgage lending practices were becoming looser and interest rates could rise sooner than financial markets expected.
Persimmon was the second-top FTSE 100 faller, down 2.3 percent, while Barratt Developments shed 0.4 percent. Mid-cap Bovis Homes dropped 1.1 percent.
Traders also saw those dips as a buying opportunity. While higher rates would raise the costs of borrowing to build, it would also signal the economy, and consequently funding prospects, were looking brighter.
“I think being long the UK housing market, which effectively you are by going in long the UK housebuilders, is a reasonable play,” Joe Rundle, head of trading at ETX Capital, said.
$1 = 0.5956 British Pounds Additional reporting by Alistair Smout; Editing by Larry King