The blue-chip FTSE 100 (.FTSE) gained 1.1% on close, rising for the third straight session.

Market jitters around a global financial meltdown appeared to ease after a U.S. regional bank scooped up assets of failed Silicon Valley Bank (SVB) earlier this week.

"Banking worries around the world are easing and the UK is no exception," said Steve Sosnick, chief strategist at Interactive Brokers.

"It's not as though someone rang a bell and gave an all- clear, but I do think people are starting to feel a bit more comfortable about the banking sector worldwide."

UK banks (.FTNMX301010) jumped 2.2%, their best single-day performance in more than a week as lenders Barclays (BARC.L) and HSBC (HSBA.L) rose 3.5% and 2.4% respectively.

The domestically focussed FTSE 250 (.FTMC) also added 1.3%, with Bellway (BWY.L) surging 7.2% after UBS raised its price target on the homebuilder.

The broader home construction sector (.FTNMX402020) surged 3.3%.

Meanwhile, Bank of England data showed the volume of mortgages approved by British lenders picked up in February by more than expected, adding to signs that the downturn in the housing market may be levelling off.

British real estate stocks (.FTUB3510) rose 2.4%, posting their best one-day performance in two months.

A recent rally in banks stocks coupled with rising commodity prices boosting commodity-linked stocks has brought London's FTSE 100 back to levels seen at the start of the year.

On the downside however, Next (NXT.L) slumped 4.3% after the fashion retailer said that higher costs for wages and energy were still expected to reduce its profit this year, even as it reported higher annual profit.

The Bank of England told regulators to move fast to toughen rules for funds used by Britain's pension industry which nearly collapsed last year after former Prime Minister Liz's Truss's "mini-budget".