ISLAMIC State has claimed responsibility for Saturday's terror attacks in London that saw three men in a van plough into pedestrians on London Bridge before going on a stabbing spree in the city's popular Borough Markets.

Three Australians are among dozens injured in the attacks. At least seven people were killed.

Metropolitan police said the men, wearing hoax suicide vests, were confronted and shot within eight minutes of the attack being called in just after 10pm on Saturday night.

Seven deaths have been confirmed and 48 people were injured. Of those in hospital, 21 remain in a critical condition.

IS claimed the attack in a statement released through its Aamaq news agency on Monday morning.

"A security detachment from Islamic state carried out London attacks yesterday," it said.

It's the third attack this year that Islamic State has claimed in Britain, and follows the Manchester bombing and a similar attack in the heart of London in March.

Police responded quickly to the frenzied attack that rocked the city, halting the offenders and carrying out controlled explosions to deter further attacks.

POLICE FIRED 50 ROUNDS AFTER STORMING MARKETS

LONDON'S Metropolitan Police accidentally shot a member of the public during their response to the terror attack.

Assistant Commissioner Mark Rowley said eight firearms officers discharged an "unprecedented" 50 rounds after storming into Borough Market and finding three men having stabbed members of the public and wearing what appeared to be suicide vests.

"The situation these officers were confronted with was critical - a matter of life and death - three armed men, wearing what appeared to be suicide belts, had already attacked and killed members of the public and had to be stopped immediately," he said.

"As the officers confronted the terrorists - and were shot - a member of the public also suffered gunshot wounds.

Although we do not believe the injuries to critical in nature, they are in hospital receiving medical attention. We will of course keep you updated on that.

Eyewitnesses had also reported police smashing the windows and trying to get into a pub as the attack was carried out.

"[The police] fired at least 20 times. One of the guys in the pub took a bullet," an eyewitness told The Sun.

Asst Commissioner Rowley said police were making "significant progress" and had found the white van was hired shortly before the attack.

Canada's Prime Minister Justin Trudeau says one of those killed in the London Bridge attack was a Canadian citizen.

Thirty-six poeple remain in hospital with 21 in a critical condition.

'THE THING BOTHERING ME'

A witness to the aftermath of the London Bridge terror attack has told of his horror and fear at the chaotic scenes unfolding outside his home on Saturday night.

Norwegian man Peter Cassizzi, 41, has lived near Borough Market since February and said he was at home with his girlfriend when the sudden silence in his usually busy neighbourhood piqued his attention.

"All of a sudden it went silent. Moments later police in riot gear were storming in and taking up positions," he told news.com.au

"Police were nervous. They seemed like they didn't have a good overview of the situation."

After nearly an hour had passed he went downstairs to assess the situation and said he was immediately confronted by armed police on the hunt for attackers.

"As soon as I stuck my head out the door they yelled at me, get my hands up," he said. He joined a stream of people coming out of a nearby restaurant and was told to run across London Bridge.

Speaking on Sunday morning from outside the cordon having had no sleep, he said one factor playing on his mind is the sound of shots being fired when he spoke to his girlfriend on the phone around 5:30am.

"That's the thing that's been bothering me about it," he said. "She's terrified, I really want to get back."

Metropolitan police said the three attackers were confronted and shot by police within eight minutes of the attack being called in just after 10pm on Saturday night. Controlled explosions were carried out around 1:30am but no further gunfire has been explained.

Seven people have died and 48 are injured in hospitals across London.

Queensland woman Candice Hedge said she had her throat cut but no major arteries.

Another Australian man known only as Andrew appeared on video clutching a bloody piece of material to his neck saying the terrorists made no attempt to cover their faces.

New Zealand man Oliver Dowling endured a four hour surgery after being stabbed multiple times in the neck. His girlfriend Marie Bondeville is also recovering in hospital.

'HE SAID EVERYTHING WAS FINE'

Police have carried out raids on homes in East London and made 12 arrests following the attack.

Three of the terrorists were shot dead at the scene but police said earlier they were not "100 per cent" confident they had caught everyone involved.

A neighbour of one of the men arrested told The Times he recognised the attacker pictured in an Arsenal shirt with hoax "canisters" stuck to his waist in an explosive belt.

"I spoke with him yesterday, about 5pm," Seva Litvjakovs told The Times.

"He seemed to be tidying up his car, taking stuff out. He was with two other guys. He was wearing his Arsenal shirt. I just said 'hi' and asked if he was OK. He said everything was fine. He had a British accent. His beard was longer, bushier [than in a photo he was shown]."

"I have always found him very friendly but my missus said he was a bit strange. I heard him once telling off some local kids who were being noisy. He said, 'We are Muslims we do not behave like that'. Someone said they had seen him on television a while back talking about religion."

Another neighbour, Furqan Navi, said he too recognised his neighbour as one of those pictured lying dead in the market.

"He lived there with his wife and two children, he'd been there for about three years. He seemed pretty friendly but I didn't know him," Navi told The Guardian.

HEROIC ACTS REVEALED

Eyewitnesses have recounted heroic acts carried out by ordinary Londoners at the scene.

Richard Angell told news.com.au he saw a man hold a door with his foot to save a restaurant full of people from being potentially exposed to any attackers. He said another "heroic" man hurled a table at a terrorist to stop them attacking others.

Black cab driver Aksha Patel said he carried a passenger who had acted as a barrier for "a few seconds", to let people out of the Black and Blue restaurant.

He told Sky News: "She knew they were bad people trying to break in." She managed to hold the door for a few seconds but they overpowered her. "People managed to escape through the rear door possibly saving a good 20 people's lives."

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