Officers detained the suspects on Sunday morning in Barking, east London, and searched addresses in the area.
Scotland Yard said seven women between 19 and 60 were detained under the Terrorism Act while five men aged 27 and 55 were also arrested – one of whom has since been released without charge.
Just before 7am on Sunday morning, residents at the Elizabeth Fry block of flats, in King’s Road, were woken when several armed units arrived.
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Armed police made arrests in Barking and East Ham
We knew him as a neighbour. He was someone that has always been a member of the community
Neighbour of suspected terrorist
Veronica Oladapo, 45, said three people were taken by ambulance and also saw two others at the scene.
One man has been released without charge after police raided four properties in the area, making arrests at two addresses.
Salaudeen Jailabdeen, 40, who lives in a neighbouring block of flats, said he had immediately thought of his neighbour when the first photos of the alleged attacker appeared.
London terror raids Sun, June 4, 2017
Police have raided a block of flats in Barking in connection with last night's London Bridge terror attack.
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As police continue their investigations following the June 3 terror attacks, a block of flats in Barking is raided for possible suspects
When he saw a picture of the suspected terrorist he said: “Definitely yes, he is the one.”
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He also recalled an incident at a mosque a couple of months earlier, when the suspect disrupted an imam who was preaching and was later escorted out.
Mr Jailabdeen said: ”He interrupted the imam, he asked a question, he disagreed with that. And then people said to him 'don't interrupt this time, come back later, or after the preach ask the questions'. He didn't agree with that.
“We feel until the police release more information, it is not appropriate for us to speak about anyone that may or may not have prayed at the mosque."
Damien Pettit, 31, said he thought one of the attackers could be his neighbour from the ground floor of the apartment block.
He said: “We knew him as a neighbour. He was someone that has always been a member of the community in terms of wanting to help out. He's always been very affable, very pleasant.”
The emergency services have been praised for their prompt and brave response on Saturday
But he said he could not definitely confirm his neighbour was the man pictured.
Another neighbour, Ken Chigbo, 26, a market analyst, said the man had recently questioned him on where he could hire a van and if it was possible to get one with an automatic transmission.
He said: “I am moving and he was very interested in that and wished me well … He was particularly interested in the van I hired, where I got it from and if it was an automatic.
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SIX people have been killed after a horrific terror attack targeted London Bridge and Borough Market on Saturday night. These are the pictures are London wakes up to the tragic scenes
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The arrests took place at 7am on Sunday morning
“It’s very strange to think about that conversation considering what happened just a few hours later.”
Police said they would release the names of the three men who killed seven people on Saturday night “as soon as operationally possible”.
Mark Rowley, MET Police Assistant Commissioner, said in a statement: “The public can expect to see additional police – both armed and unarmed officers – across the capital as you would expect in these circumstances.”