One in five buy-to-let investors reported a fall in tenant demand at the end of 2017, a level not seen since 2012, the lender’s report showed.
At the same time, the number of landlords reporting expansion sank to 12% – the lowest ever number recorded in the sentiment tracker.
Investor confidence in their letting business was down 6% year-on-year to 38%, close to the record lows seen in the second quarter of 2017.
Landlords felt less optimistic about the near-term prospects for both rental yield and capital gains.
Sentiment towards the UK’s financial markets and private rental sector also feel annually, but edged up compared to the third quarter.
Demand from tenants was reported as lowest in London, the North East and South East.
However, in Scotland, the East Midlands and the South West demand increased.
The average rental yield in the fourth quarter remained relatively stable at 5.9% with landlords in the North West generated the highest rental yield of 6.7% and those in Outer London achieving the lowest yield of 5.0%.
Phil Rickards, head of BM Solutions, said: “At the end of 2017 landlords were less confident than in the previous year, especially in terms of their own letting business – this is to be expected given the volume of change they’ve experienced.
“We have more recently seen the introduction of new portfolio rules in 2017 which will also have started to impact the proportion of landlords looking to expand their portfolio in the next year, while the market adjusts to further change.
“Having said all of this, profitability still remains strong, with a healthy 86% of landlords making a profit and the average rental yield remaining stable.”