Police Search and Rescue, Whangarei Coastguard and the Marsden Point Oil Refinery emergency services boat were all called out.
The group was found on shore at rocks underneath the gun emplacement.
One person was suffering from hypothermia and another had foot lacerations, police said.
St John Ambulance and the Whangarei Heads Volunteer Fire Brigade were also called into assist.
All five managed to walk back to the end of the road at Urquharts Bay for a medical check by ambulance staff.
They were given the all clear, but head of Northland Police Search and Rescue, Senior Sergeant Cliff Metcalfe, said things could have ended in disaster.
"Not only were there five adults in a 3.6m dinghy, which was overloaded, but there were only three lifejackets between them," he said.
"When their engine failed they got into some serious trouble and were blown, thankfully, towards the shore. Had this happened outside the harbour I'd hate to think what would have been the likely outcome."
With the current cold snap, the air and water temperature would have meant anyone who was in the sea would have struggled to stay alive for any length of time, Mr Metcalfe said.
"Even when they managed to get ashore the risk of hypothermia was still very real due to wet clothes and cold air temperature."
The incident was a reminder that people need to be well prepared when they go boating, he said, urging people to bring lifejackets for everyone on board, and that the engine should be in good working order.