Neighbours called the Fire Service just before 1am but by the time fire trucks arrived less than seven minutes later the house was aflame.
The mother said she woke up to a dark house but could see smoke and the light reflecting from the fire in the lounge.
"We never thought something like that would happen and then it happened. Everything ... just gone.
"Someone must have been looking out for us. Last night when it happened, we didn't really care because we were alive - but now that we've had a rest, it has started to sink in and kick us fairly hard.
"We've got to start all over again. Our kids have no clothes. For my family to be in something like that - it was scary."
Senior Fire Safety Officer Derek Goodwin said the family were incredibly lucky to be alive.
It is believed the fire started after an A-frame clothes dryer was left less than a metre away from an open fire with no guard on it.
"It was either radiated heat from the fire against the clothes, or it was a spark," he said.
He reiterated the importance of having smoke alarms in a home, having an escape route and making sure the "metre heater" rule was always followed.
Mr Goodwin said people should be very careful when drying things in front of fires or hot appliances.
"They were obviously using the fire for heating and drying last night, and they were so very lucky."
It is the third house fire in Gisborne in less than six weeks in which families have been described as "very lucky" to escape alive.
Mr Goodwin said it was astonishing that 20 people's lives could have been imperilled in such a short time.
"We've seen three families come very close to losing not just everything they own but their lives as well.
"We are seeing a spike in these fires and I think it's mainly because of the time of the year where everyone is cold and just trying to keep warm, trying to dry things because you can't get outside or because it's too expensive to have a clothes dryer."
The best landlord for fitting and monitoring smoke alarms was Housing New Zealand, which made sure all its homes had alarms and checked them every six months, he said.
- APN