Mr Wirepa said he went to the units to find Mr Lydon in the doorway, calling for his wife who was still inside, while nearby residents looked on.
"Everyone was just standing there watching. There were flames and smoke coming out of the house and nobody was doing anything," he said.
"So I ran inside and tried to get Heather to come outside. She was clearly in shock but she recognised my voice and we managed to get out safe. It was such a surreal experience but I'm glad they're okay."
Mr Wirepa, who recently experienced a family tragedy, said he knew Mr and Mrs Lydon well as they had been living next to him and his family for more than 13 years.
"When I realised she [Mrs Lydon] was still in there, I said to myself, 'no one's going to die today'. I've already lost a relative, I'm not losing my neighbour as well, not if I can help it."
After the fire crews arrived Mr Wirepa took the couple into his family's home.
Mrs Lydon, who will soon turn 70, said she was incredibly grateful for Mr Wirepa's help.
"It means so much to me and my husband. Without him we would have been lost. He's an amazing young man."
Rotorua Fire Brigade senior station officer Colin Rolfe said fire crews managed to contain the fire within 10 minutes, but the unit where the fire started was badly damaged and was deemed unlivable. The Lydons' unit has smoke damage.
Mr Rolfe said the cause of the fire was under investigation.