Britain's FTSE set for third straight month of gains

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* FTSE 100 flat

* Banks, Berkeley Group lead the gainers

* Miners track metals prices lower

* Restaurant Group (Other OTC: RSTGF - news) falls on downgrade

By Kit Rees

LONDON, Aug 31 (Reuters) - UK shares steadied on Wednesday as weakness in mining shares outweighed gains by banks, though the FTSE 100 remained on track to post its third monthly gain in a row.

The blue chip FTSE 100 index flat in percentage terms at 6,819.35 points by 0847 GMT, slightly underperforming the broader European market.

Banking stocks Barclays (LSE: BARC.L - news) , Royal Bank of Scotland (LSE: RBS.L - news) , HSBC Holdings (HKSE: 0005.HK - news) and Lloyds Banking Group (Other OTC: LLOBF - news) all rose 1.3 percent to 2.4 percent after a series of encouraging reports on the British economy.

The latest showed British consumer morale in August recovered somewhat from the slump that followed Britain's vote to leave the European Union. Another, from mortgage lender Nationwide, said house price rises picked up speed more than expected in August .

The house price data buoyed housebuilder Berkeley Group , which led the day's gains with a 2.5 percent rise, despite worries that it could be relegated from the FTSE 100 in an upcoming reshuffle.

The FTSE 100 is now 7.3 percent above its pre-Brexit level helped by a fall in sterling. The FTSE 250 has also recovered, up 2.6 percent since the vote.

"The market seems to be relatively buoyant and that's not really surprising given that interest rates are so low. There's not many other options in terms of where money is going to flow other than the stock market, given the historic low yields on bonds and cash not really producing very much," said Laith Khalaf, senior analyst at Hargreaves Lansdown (LSE: HL.L - news) .

Mining companies fell the most on the FTSE 100 as metals prices dropped. Randgold Resources and Fresnillo (Amsterdam: FN6.AS - news) both lost 2.4 percent. BHP Billiton (NYSE: BBL - news) , Anglo American and Rio Tinto (LSE: RIO.L - news) dropped 1.7 percent to 2.2 percent.

Outside the blue chips, Restaurant Group dropped 4.6 percent after Citigroup (NYSE: C - news) cut its rating on the stock to "sell".

"Restaurant Group's share price has bounced over 50% of late. Given this significant move, and the view that the group faces ongoing operational headwinds, we once again downgrade the stock recommendation to Sell," Christopher J McVey, an analyst at Citigroup, said in a note.

(Reporting by Kit Rees, editing by Larry King)