Chancellor Alistair Darling has said the UK economy will ride out the international "credit crunch" - despite problems at the Northern Rock bank.

Mr Darling said the robust economy, low interest rates and low inflation mean Britain can cope with volatility sparked by defaults from borrowers in the US mortgage sector.

And he repeated assurances to Northern Rock savers that their money is safe and said the Government will guarantee their cash.

He said: "We have had shocks to the system in the recent past with the collapse of the Asian markets in the late 1990s, with the collapse of the American stock market earlier in this decade. Both of those instances we dealt with, our economy carried on growing when others faltered."

Regarding Northern Rock - which has seen huge queues of savers withdrawing cash - he said: "If people want to get their money out of Northern Rock bank, they can do it.

"The money is there and it is backed by the Bank of England so they can get it."

The global credit crunch has been sparked by worries about the extent of bad debts caused by US sub-prime lenders, who loan cash to people with poor credit histories.

It is not yet clear which financial institutions are holding the debts - which have been sold on - and banks have been reluctant to lend money to each other as a result.

Mr Darling said: "The problem at the moment is not that there isn't money in the system, because the banks do have a lot of money. It is the fact that they have been reluctant to lend to each other."

The Chancellor added that he wants to see more homeowners take out fixed-rate mortgages over longer periods, so they are shielded from swings in the credit markets.

Interest rates on mortgage products have risen in recent months due to a combination of the Bank of England raising its base rate, and a lack of liquidity on credit markets.

This year has seen the emergence of long-term fixed-rate mortgage products from mainstream lenders, lasting from 10 to 25 years.

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