Buoyant sentiment also reflected new highs on Wall Street while riskier stocks such as miners returned to favour as the FTSE 100 peaked at 6877.4, setting its highest mark since January 2000.
It meant the blue-chip index was in sight of its all-time intra-day high in December 1999 of 6950.6, and though it drifted a little lower than this by the end of the session, it still closed 21.3 points up, at 6873.1.
Germany's Dax and France's Cac 40 were also ahead.
In New York, the Dow Jones Industrial Average had hit a new peak on Monday night and was again in positive territory at the time of the close in London. Meanwhile, the Standard & Poor's 500 index crossed 1,900 for the first time.
On currency markets, the pound held firm at 1.68 US dollars and 1.23 euros.
In London, the latest improvement was driven by house builders after FTSE 250 firm Taylor Wimpey said it was confident it will have met or exceeded its main financial targets by the end of next year.
Aided by Government schemes such as Help to Buy, the company also announced an enhanced set of financial targets for 2015 to 2017.
Taylor Wimpey shares surged by nearly 8%, or 8.1p to 114.4p in the FTSE 250 Index, while its top-flight rivals Barratt Developments and Charles Church owner Persimmon were 12p and 44p higher at 386.3p and 1404p respectively.
Mining stocks also continued their strong week with a steady session as BHP Billiton improved 17p to 1965p and commodities trader Glencore Xstrata added 1.1p to 330.6p.
In corporate updates, shares in low-cost airline easyJet lost some of their recent strength in the wake of half-year results. Shares were 72p lower at 1658p at the top of the fallers board, even though the airline produced a smaller-than-expected winter loss of £53 million, down from £61 million a year earlier. Analysts at Cantor Fitzgerald said the shares were fully valued after a run in which the airline is now a well-established member of the FTSE 100.
There was a similar decline for TUI Travel after the Thomson and First Choice tour operator announced a slightly lower half-year operating loss of £315 million.
Chief executive Peter Long said he was pleased with summer trading, given strong comparatives, and added that the company remains on track to deliver 7% to 10% growth in underlying operating profits during the year.
Shares have enjoyed a strong run in recent weeks but were down by nearly 2% or 7.8p to 433.8p in the wake of the update.
Rival Thomas Cook was 1.3p higher at 183.2p ahead of its own update later in the week.