By Simon Falush

LONDON (Reuters) - The top share index fell more than 1 percent by midday on Friday as weaker mining stocks led by Anglo American (AAL.L: Quote, Profile, Research) and falling banks outweighed solid gains in housebuilders.

By 12:16 p.m. the FTSE 100 .FTSE was down 60.6 points, or 1 percent, at 5,647.8. The index has fallen 6.8 percent this month and 12.3 percent in 2008.

Banks were weaker, with shares in the country's largest mortgage lender HBOS.L falling 2.4 percent after an almost 7 percent drop on Thursday, as analysts cut price targets and estimates and predicted further deterioration in the housing market.

Miners fell on profit-taking, with Anglo American (AAL.L: Quote, Profile, Research) losing 2.8 percent after gaining about 15 percent in the past five sessions. BHP Billiton (BLT.L: Quote, Profile, Research) slipped 1.9 percent.

"The FTSE is continuing its trade-off between a weaker domestic economy, which is hitting the banks, and the strength of the resources sector," said Roger Cursley, UK strategist at Investec.

Building materials distributor Wolseley (WOS.L: Quote, Profile, Research) was the top loser in the FTSE 100, down 4.3 percent after Morgan Stanley downgraded its rating on the company.

Housebuilders were up broadly after Building Magazine reported that Barratt (BDEV.L: Quote, Profile, Research) had reached an agreement with banks over funding.

FTSE 250 listed Barratt was up 17.2 percent while Persimmon (PSN.L: Quote, Profile, Research) topped the blue-chip index gainers, up 7.1 percent.