PUERTO CABEZAS, NICARAGUA (REUTERS) - Storm Iota unleashed torrential flooding in Central America on Tuesday (Nov 17), causing swollen rivers to burst their banks as it flipped roofs onto the streets, and downed electricity poles and trees, killing at least two people in the region.

The strongest storm on record to reach Nicaragua, Iota struck the coast late on Monday, packing winds of nearly 249kmh and flooding villages still reeling from the impact of Hurricane Eta two weeks ago.

By midday (2am on Wednesday, Singapore time), the winds had fallen to 105kmh as Iota weakened to a tropical storm, the US National Hurricane Centre (NHC) said.

But it continued bringing down heavy rains as it moved inland toward southern Honduras.

"We're flooded everywhere, the rain lasted almost all night and now it stops for an hour then comes back for 2-3 hours," said Marcelo Herrera, mayor of Wampusirpi, a municipality in the interior of north-east Honduras crossed by rivers and streams.

"We need food and water for the population, because we lost our crops with Eta," he told Reuters.

Iota marked the first time two major hurricanes have formed in the Atlantic basin in November since records began.

The Nicaraguan port of Puerto Cabezas, still partly flooded and strewn with debris left by Eta, again bore the brunt of the hit.

Frightened residents huddled in shelters.

"We could die," said one, Inocencia Smith. "There is nothing to eat at all," she added, noting Eta had shattered local farms.

The wind tore the roof off a makeshift hospital. Patients in intensive care were evacuated, including two women who gave birth during the first rains on Monday, the government said.

Guillermo Gonzalez, head of Nicaragua's disaster management agency SINAPRED, said he had reports of damage to houses and roofs, fallen power lines and overflowing rivers, but no deaths.

Unlike its neighbours, Nicaragua did not register fatalities from Eta, although local media said the storm killed at least two people there, plus dozens more across Central America.

Iota passed close to Providencia, one of a cluster of islands in Colombia's Caribbean province of San Andres. Local authorities reported at least one death there.

"We have a critical situation in Providencia," Colombian President Ivan Duque told local radio on Tuesday morning. "Many people have lost everything."

As much as 98 per cent of the island's infrastructure may be destroyed, Duque added.

Panama's government said a person had died in its western Ngabe-Bugle region due to conditions caused by storm.

A resident of Brus Laguna on the Honduran coast told local radio a boy was killed by a falling tree, though the mayor, Teonela Wood, said she had no reports of fatalities.

The International Federation of Red Cross and Red Crescent Societies (IFRC) said Iota risked causing disaster after Eta.

"We are very concerned about the potential for deadly landslides in these areas as the soil is already completely saturated," IFRC spokesman Matthew Cochrane told a media briefing in Geneva on Tuesday.

About 40,000 people in Nicaragua and 80,000 in Honduras were evacuated from their homes, authorities said.

By early afternoon, Iota was about 170km east of the Honduran capital Tegucigalpa, the NHC said.

The NHC said Iota could dump up to 76cm of rain in some areas, compounding damage wrought by Eta.

"We are in the hands of God. If I have to climb up trees, I'll do it," said Jaime Cabal Cu, a farmer in Guatemala's Izabal province.

"We don't have food, but we are going to wait here for the hurricane that we're asking God to stop from coming."