Margaret Ferguson’s family home on the Isle of Lewis was crowded with portraits. There were more than a hundred, and each was of a man looking out from the canvas. Veterans of the first world war, each man drowned on the same night, on the same boat, a short distance from safety.

In heavy seas and a pitch-black night, an overcrowded steam yacht taking them home on leave, the Iolaire, struck a treacherous reef known as the Beasts of Holm in the early hours of New Year’s Day 1919. They were barely a mile from Stornoway harbour and 50 yards from the shore, and of the 280 men on board, only 79 survived.

It remains the UK’s worst peacetime maritime disaster since the sinking of the Titanic – and is being marked by an official ceremony on Tuesday. Yet a century on, the Iolaire story is barely known beyond the Western Isles, despite its scale and horror.

Its memory was suppressed too for generations on Lewis: every family, in a still tightly knit community, was either directly affected or knew someone who had died. Until quite recently, it was rarely, if ever, discussed.

“It is very, very deep within us. In fact, when I think about it, I get a tightness in my chest. The tears are just below the surface,” Ferguson said.

Ferguson, a painter and a widely respected family doctor on Lewis for the last 30 years, said she felt compelled to make the portraits, using black and white family photographs and an archived roll of honour from the Stornoway Gazette, published in the 1920s. Her great-great uncle, Alexander Mackenzie, is among them.

Sheòl an Iolaire, an art installation of 280 illuminated columns, which sketches the outline of the Iolaire’s hull. Photograph: Murdo MacLeod/Guardian

She stored the pictures in her family’s uninhabited ancestral home on the Point peninsula, which overlooks the seas the Iolaire sailed that night, before being exhibited in Stornoway from 31 December until 2 March, one of a series of commemorative events to mark the centenary of the disaster.

In Stornoway harbour, 280 illuminated columns are fixed on to the seabed, sketching the outline of the Iolaire’s hull: 201 of those columns have been lit in blue for those who died while 79 remain white for those who survived. Designed by Malcolm MacLean and Torcuil Crichton, the lighting effect on the artwork, named Sheòl an Iolaire, Gaelic for “the Iolaire sailed”, changes as the tide comes in and recedes.

The commemorations, among the last being staged to mark the centenary of the first world war, include a New Year’s Day service overlooking the site, which will be attended by Prince Charles and Nicola Sturgeon, Scotland’s first minister.

The Iolaire in 1908, before it went into naval service. Photograph: Lewis Museum Trust Collection/PA

Ferguson believes Lewis has begun to come to terms with the tragedy; even so, the portraits were kept temporarily in the family home because no one lives there. They were propped up on furniture, hung from walls, stacked against walls. “We’ve been talking in the family, saying that there are so many ghosts in the house,” she said. “My father finds it very difficult to go into the room with them.”

As she worked on each image, “I kept thinking I was honouring this man and what he went through, and his family,” she said. “And I got a bit upset towards the end. It was a very intense experience, especially when I paint the eyes. It feels as if he’s in the room with you.”

Ian Stephen, a poet and former Stornoway coastguard whose career began in a coastguard station overlooking the Beasts of Holm, believes everyone on Lewis knows the stories.

There are accounts of drenched, numb survivors immediately walking home across the moors in the storm, too traumatised to wait for help; of women who rushed to the shore to find their sons’ and brothers’ inert bodies among the rocks or surf, their baggage and presents strewn over the sand; of the stream of coffins being taken by horse and cart to be buried every day throughout the following week.

His great-uncle, John Smith, was one of those who died. “It really wasn’t talked about much. We were just aware there was a connection to the Iolaire. It’s only recently that it sunk home that was my grandfather’s brother,” Stephen said.

“Part of the reason for the silence is the enormity of the tragedy; having lived through that hell [of war], they were so close to the shore.”

All the men had spent the war at sea, on minesweepers, battlecruisers and destroyers. Some had already survived sinkings under enemy fire. Many, often volunteers who had joined the naval reserve, had navigated the narrow channel where the Iolaire struck the rocks as fishermen in civilian life.

A monument on the Beasts of Holm, the reef where disaster struck. Photograph: Murdo MacLeod/Guardian

But the disaster had one hero, John Finlay Macleod, a boat builder from Ness who was on board the Iolaire that night. He saved nearly 40 lives by diving into the churning seas with a rope, then used it to pull a thick hawser taut between the yacht and the beach as a lifeline for survivors.

Malcolm Macdonald, the co-author of an authoritative new study of the disaster, The Darkest Dawn, believes the community-wide trauma was amplified by the heavy wartime losses the Western Isles had already experienced, which in turn contributed to further waves of emigration and economic decline in the 1920s.

Lewis and Harris, the two northern islands of the Western Isles, had a population of 34,600 in 1911. Macdonald estimates about 1,500 of those were killed during the war, and with another 201 lost on the Iolaire, that was an immense cumulative loss of young men and fathers.

Although the official board of inquiry refused to find fault, Macdonald and Stephen believe the Iolaire’s commander and navigating officer made colossal navigational errors, taking the wrong course and failing to correct it in time, in a force 8 gale.

Now aged 70, Macdonald, whose grandfather was among those who died, recalls it was never discussed when he was a child but he has recently been touring schools to discuss his book. “Everyone seems to want to open up and hear the full story. Young children at the schools I have spoken at all sit silently, listening, but then the questions, questions, questions keep pouring out,” he said.