LONDON—British households are increasingly turning to debt, keeping the economy motoring but opening up a potential vulnerability as the U.K. government prepares for complex exit negotiations with the European Union.

Britons’ unsecured borrowing hit a near 12-year high in November as consumers splurged on credit cards, dipped into their overdrafts and took out new personal loans, encouraged by record-low interest rates.

The pickup in borrowing suggests that consumer spending continued to power economic growth in the final three months of 2016. But it has also stoked concern among many economists that the current household-driven expansion may not last, given lackluster wage growth, dwindling savings and accelerating inflation.

U.K. consumer credit grew by £1.9 billion ($ 2.3 billion) in November, Bank of England data showed Wednesday, in the largest monthly increase since March 2005. Including new home loans, household borrowing rose by £5.1 billion in November, net of repayments, around £200 million more than in the previous month and the largest increase since mid-2016. The number of new mortgages also inched up in November, hitting an eight-month high.

Extra borrowing has helped fuel a post-Brexit-vote retail bonanza. Sales growth hit a 14-year annual high in October after a robust summer. British shoppers’ resilience helped the U.K. economy grow steadily in the three months following the June 23 Brexit vote despite disappointing export figures. The International Monetary Fund predicts the U.K. will grow around 1.8% in 2016, a faster pace of growth than it forecasts for the U.S.

But many economists—and officials at the Bank of England—expect consumer spending to slow this year, which could weigh on the wider economy. Slowing growth, which raises the specter of rising unemployment, risks sapping public support for Brexit just as Prime Minister Theresa May embarks on divorce talks with Brussels expected to last at least two years. Mrs. May has said she would kick off talks before the end of March.

Samuel Tombs, chief U.K. economist at London-based consultancy Pantheon Macroeconomics, said the rapid growth in unsecured borrowing seen in November is “unsustainable,” adding that weakening consumer confidence suggests that households will borrow more cautiously in 2017 than they did in 2016.

Rising prices are also expected to put the brakes on spending. The BOE expects annual inflation to exceed its 2% target within months, renewing a squeeze on British living standards that could make Britons less eager to part with their cash.

The central bank, which cut its benchmark interest rate to a 322-year low in August to cushion the economy from any Brexit-related shock, has said it would permit a brief overshoot of its inflation goal but won’t hesitate to raise borrowing costs if price-growth threatens to spiral out of control.

Officials have also signaled that they are unwilling to let consumer debt burdens rise too far. They have moved to tighten lending criteria in recent years to damp some types of risky borrowing.

Proponents of Brexit believe any slowdown in the economy will be short-lived and that the U.K. will prosper outside the EU, where it will be free to ink new trade deals and cut red tape.

Write to Wiktor Szary at and Jason Douglas at

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