The same problem, but it emerged only after adding a new Host Override record, and not immediately after upgrade to 16.7.10.
Fixed with "chmod 644 /var/etc/dnsmasq-hosts" and "Restart Service" button in DNS Forwarder settings.
Fixed with "chmod 644 /var/etc/dnsmasq-hosts" and "Restart Service" button in DNS Forwarder settings.