LONDON (Reuters) - British mortgage approvals for house purchases rose faster than expected in September to their highest in 18 months, but consumers continued to cut back on unsecured borrowing for a third consecutive month.

The Bank of England will decide whether to extend its quantitative easing policy next week, and alongside the mixed lending data it will have to consider weak growth in M4 money supply, which QE had been expected to help.

Headline M4 grew 0.8 percent in September for an 11.6 percent annual rise. But the central bank's preferred measure, which excludes some non-bank financial intermediaries such as clearing houses, fell 0.9 percent on the month and shrank at an annualised rate of 1.7 percent in the third quarter.

The mixed signals provided little steer to British government bond or foreign exchange markets.

"The recovery in housing market activity may still have a bit of life in it, but the weak money supply figures bolster the case for more QE next week," said Vicky Redwood of Capital Economics.

"While the monthly figures can be volatile, it is clear that money growth is still well below rates needed for a decent economic recovery," she added.