Residents of Tathra, just east of Bega, were told it was too late to leave on Sunday evening as the blaze raced towards properties, with one describing the situation as "dire".

The NSW Rural Fire Service issued an emergency warning after the fire, which started in Tarraganda early in the afternoon, crossed the Bega River.

Fanned by strong winds and high temperatures, it burned through seven kilometres of bushland into the township and right to the coast.

The threat was downgraded late on Sunday night after a southerly change helped ease conditions but a great deal of damage had already been done.

"We're aware of about 35 homes that are potentially damaged or destroyed," Bega Valley mayor Kristy McBain told AAP.

No fatalities have been reported but there are concerns for some people still stuck in the town.

Tathra's water supply has been cut off and communication is limited with a mobile tower down, Ms McBain said.

"Until tomorrow we won't know the full extent of the damage, but we'll get on top of it as soon as possible."

Tathra Beach Motor Village said it had experienced "significant" damage and would be closed until further notice.

The blaze tore through its front office and reception area but management wasn't able to confirm what other parts had been affected.

"This is a very dire and devastating situation for all involved," the park posted on Facebook.

Jesse from the Tathra Surf Life Saving Club told AAP the club had been spared but the fire "reached just about everywhere else" in the town.

Tathra Public School, Bega High School, Tanja Public School and Bournda Environmental Education Centre will all be closed on Monday. It's unclear if any have been damaged or destroyed.

About 400 people fled to evacuation centres in Bega and Bermagui, with many being offered beds in the local area.

Bruce McAslan, president of Bermagui Surf Life Saving Club, said many people were blindsided by the fire, including tourists at a number of caravan parks.

"It turned very quickly and a lot of people said they were told to 'get out now, we mean now', so they said 'we just packed up our stuff and left'," Mr McAslan told AAP.

"It was pretty tough on some people but the attitude was really good."

Bermagui Country Club was offering evacuees free meals, while the local chemist and Woolworths supplied medication and food. Locals were also donating clothing, bedding and toiletries.

"People arrived with absolutely nothing but the clothes on their back," Mr McAslan said.

The Insurance Council of Australia has declared it a "catastrophe", meaning claims by those affected by the blaze will be given priority.

The worst-affected property owners will be given urgent attention, it said in a statement, adding it was too early to determine the extent of buildings lost or estimate the financial toll.

NSW RFS deputy commissioner Rob Rogers said it had been an "awful" day, with the combination of strong winds, high temperatures and low humidity making it bad for firefighting.

A number of firefighters and residents suffered heat stress, he said.

Total fire bans were issued for more than half of NSW on Sunday including the Greater Sydney region given the hot and windy conditions.

Temperatures soared to 40.5C at 4.30pm at Sydney Airport while further west at Penrith, they reached 38.8C.

Australian Associated Press