CFA District 16 operations officer Bernie Fradd said the fire in the house on a large residential block in the Skipton town centre was reported about 4pm on Monday.

The fire put up a large pall of smoke that prompted the issue of a Watch and Act alert for the Skipton township.

Mr Fradd said there were car bodies and other large items around the old weatherboard house in Osborne Street that made fighting the fire difficult.

He said the fire spread across grass on the block to cause minor damage to fences and parts of gardens on neighbouring properties but the eight CFA brigades that responded were able to prevent it from damaging adjacent houses.

CFA brigades from Skipton and surrounding rural areas were on the scene until 8pm dealing with the fire and police kept watch on the fire scene overnight.

Mr Fradd said building inspectors from Corangamite Shire Council would inspect the scene today to determine whether the building should be demolished.

The house fire on Monday was across the road from the scene of another house fire that occurred last year.