7.50 am: In addition to this report from RNZ, TVNZ is reporting this morning that 50 houses have been lost and the fire now covers up to 5,000 hectares.

Fire crews have had a busy night working to protect homes at Lake Ohau village, as well as a tree plantation, as flare-ups continue to risk further damage to the area.

The fire roared through Lake Ohau village in the Mackenzie Country in the early hours of Sunday morning, spreading into nearby conservation land, farms and mountainsides.

About 90 people were forced to sleep away from their homes overnight after at least 20 houses were damaged or destroyed by the fire. About 200 affected people gathered at an evacuation centre in Twizel.

At least 300 sheep and lambs have been killed by the fire.

By late afternoon on Sunday the fire was burning over approximately 1600 hectares.

Firefighting teams were battling to stop the blaze from damaging critical infrastructure, including the main power lines servicing Queenstown and Wanaka.

Fire and Emergency's Incident Commander Steve Jones said two crews were protecting the remaining homes in Lake Ohau Village and the other two were working in the Quailburn area.

Crews used a drone at 2am and found a significant number of hotspots, which will be targeted as helicopters and ground crews begin work in the daylight, he said.

Eleven helicopters and nine ground crews will be attacking the fire today, with four crews continuing structure protection work.

Jones said conditions are expected to be challenging with high winds forecast throughout the day.

Civil Defence Minister Hon Peeni Henare will be visiting Ohau today to meet affected residents and fire crews.

Waitaki District Mayor Gary Kircher told First Up it's lucky residents got out when they did.

"The reality is it's a minor miracle that no-one has been harmed, if it had been another 15-20 minutes it would have been a very different story."

He said he hadn't had confirmation yet on how many houses in the area had been destroyed by the fire but believes the 'majority' of the 60-70 homes were 'gone'.

Kircher said it was hoped residents would get to the village at some stage on Monday to assess the damage to their properties.

Fire was going to happen sooner or later - neighbouring farmer

Hamish Smith a farmer in the area, said the DOC reserve posed a significant risk to the area for some time.

"The trouble is you've got all this dry fuel on country that isn't being grazed anymore and the only way you get rid of that dry rubbish is fire, and this is what's happening, it's full of dry and dead fuel, dead tussock, dead grass, cut down tree slash, it's a nightmare for us as neighbouring properties.

"It's not grazed, there's no fire breaks in place, there's nothing, it's just a big 2000 or 3000 hectares of fuel."

Fellow farmer Grant Murray, who borders the DOC land on Quailburn Road, said the fire was an inevitability.

"With the land that's been shut up on our boundary, it was always going to happen sooner or later, once the fire got in there it was really going to take hold.

"When we were getting sheep out by Lake Ohau we were right in the smoke, in the flames ... we were going through paddocks that were good when we went one way and when we turned around the other they had already burned through, so it was all go."