Police said a woman and two men were found dead on Tuesday morning following the severe weather event, which continues to batter the Hunter, Sydney and the Illawarra. 

The precise circumstances surrounding the deaths of the trio are still to be determined, however the Dungog Chronicle reports they were trapped as flood water surged through the town in the early hours of Tuesday morning.

Dungog resident Sally Fitzpatrick, who is a former neighbour of the dead woman, said the town was "very quiet" and "in shock".

"I heard [the dead woman] didn't want to abandon her dog and she was washed away but the dog survived," Ms Fitzpatrick said.

Locals were afraid more wild weather was set to hit the town, with many houses and business flooded, and rural properties isolated due to water over roads and a bridge collapse.

"It's getting dark and there's still no power," Ms Fitzpatrick said. "Right now there's a black cloud approaching from the south.... thick and dark to the ground, very scary looking." 

NSW Premier Mike Baird said on Tuesday more severe weather was forecast to hit before conditions eased at midnight.

NOON: Raging flash floods have claimed the lives of three elderly people and four houses have washed away in Dungog.

Two men and one woman were trapped in their residences as flood water surged through the town in the early hours of Tuesday. Emergency services could not save them.

After raining heavily all night, the heavens truly opened about 4.30am and the deluge has barely stopped.

There is no power, no mobile service and a number of roads and bridges have been washed away in the Dungog district.

It is understood the SES also rescued a couple in their 70s as they dangled from their gutters. A younger couple also was rescued from their house roof.

Stroud too, like all parts of the lower Hunter, has felt the full force of the appalling weather. It is believed showground campers were caught by flood water. One person is believed to be missing.

Senior Constable Dave Hanna, who was on his way to Stroud to lend assistance, turned back when matters escalated in Dungog. However, conditions changed so dramatically so quickly, he was forced to park his car on the outskirts of town and walk 2km along the train tracks.

Dungog resident Jarod Rits, 18, who filmed a neighbour's house being swept away in the flood waters, said he woke up to sound of heavy rain hammering his house, and went outside to asses the situation.

After seeing people fleeing their houses, Mr Rits said he "ran back inside to get things ready to get out quickly" but the water rose so quickly "we had to walk up to waist-deep to get out".

"The water came out of nowhere, it just rose that quick," he said, in a phone interview from the shelter of a friend's house.

As he joined neighbours gathering at the pub on Dowling Street, directly opposite his house, Mr Rits said he decided to capture footage of the street from the pub's verandah.

As he pointed his camera phone, a neighbour's house dislodged from its bearings and floated across the street.

Three or four houses in total got swept away, he said, including those which belonged to his friends in the street.

"They're a bit shattered, as you would be, because they didn't have any time to get anything out [of their houses]. Very upsetting times."

Mr Rits said he was "pretty sure everyone got out" because all the neighbours gathered in the one spot as the water roared down the street, snapping powerlines in its path.

"The water was just a roar, really, just rushing through the streets.

Mr Rits said his house is standing, but substantially water damaged: "My house is trashed inside and out. Everything is damaged."

- with Nick Ralston and Lisa Visenti from smh.com.au