Toufik Kacimi, chief executive of the Muslim Welfare House, speaking to Sky News, said the attack clearly targeted Muslims leaving evening prayers during Ramadan. The site of the incident is close to another mosque near the Finsbury Park on the same road.
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He said the attack was one of terror and that it was "similar" to those which have recently happened in Manchester, Westminster and London Bridge.
Counter-terrorism officers remain at the scene.
Witnesses described him as white, with tattoos, while police later confirmed they had arrested a 48-year-old on suspicion of attempted murder, they added they were not looking for anyone else.
"Like the awful attacks in Manchester, Westminster and London Bridge it is also an assault on all our shared values of tolerance, freedom and respect", he said in a statement, referring to attacks in previous months.
The blaze quickly rose through the 24-story Grenfell Tower, taking up to 40 fire engines and 200 firefighters to put it out.
"When I looked back, I thought it was a vehicle accident, but people were shouting, screaming and I realized this was a man choosing to terrorize people who are praying, an eye witness told Reuters".
The imam of Muslim Welfare House - which is also a community centre - said a passing police van was flagged down after the attack. Britain's terrorist alert has been set at "severe" meaning an attack is highly likely.
Many linked the attack to an increase in anti-Muslim hate crimes, particularly since a van and knife rampage in the capital on June 3 that left eight people dead, which was claimed by the Islamic State group. He was also killed by police.