A family of four has had a lucky escape after lithium-ion batteries sparked a horror blaze at their home in Melbourne's north-east.

Four family members, including a five-year-old and an eight-year-old, were sleeping when their home on Henry Street in Eltham went up in flames about 11.10pm yesterday.

The residents were woken by a smoke alarm and the sound of explosions after lithium-ion batteries charging in their garage burst into flames.

The garage bore the brunt of the blaze, with everything inside, including four cars, destroyed in the fire.

The home is also badly damaged and the family have been forced to find somewhere else to live.

Neighbours watched on as firefighters battled the blaze.

"Just pandemonium on Henry Street here, the smell of plastic, the street was crow

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