Consultancy GfK NOP said its confidence barometer unexpectedly fell to -8 this month from -5 in September. That was the third monthly decline in a row and the lowest since March 2003, the month of the US-led invasion of Iraq.
People's optimism on their personal finances fell to the lowest level in a year, while the index measuring whether people thought it was a good time to make major purchases was its weakest since November 1999.
Economists said high petrol and utility bills, climbing unemployment and anxiety about the economic outlook have hit consumer spending in recent months and the latest survey offered little hope of an imminent bounce back.
"It continues to suggest that the consumer is fairly soft at the moment," said David Page, an economist at Investec. "Christmas could be a tough one for retailers."
Interest rate futures rallied on the report as dealers bet it increased the likelihood the BoE would repeat its quarter-point August interest rate cut in the next few months.
But analysts are still divided on what the next move in interest rates will be, especially given policymakers' recent inflationary concerns and robust data.
BoE data on Monday showed mortgage approvals rose to 107,000 in September the highest level in more than a year, from 106,000 in August, while mortgage lending growth also picked up.
And consumer credit, or unsecured lending, also rose roughly as expected by 1.249 billion pounds after a rise of 1.321 billion in August. But that was up just 10.9 percent on the year, its weakest rate since November 1994.
"The key message is housing market activity has improved significantly into the second half of this year and confirms the downside risks to growth from the housing market are vanishing," said Alan Clarke, an economist at BNP Paribas.