(Adds details on first-half results, background and outlook)...

(Adds details on first-half results, background and outlook)

May 8 (Reuters) - Australia's Westpac Banking Corp (WBC) on Monday posted a 22% jump in first-half net profits as margins improved on the back of rising interest rates but warned tough mortgage competition will negatively impact margins going into the second half.

Over the past year, aggressive monetary tightening boosted banks' earnings and margins. However, that could come to an end as inflation, softening home prices, and a cooling economy pose risks to credit growth and asset quality.

"Credit growth – both housing and business – will ease. Intense mortgage competition is expected to negatively impact industry and Westpac’s margins in the next half," it said.

The country's No.3 lender said net profit came in at A$4.00 billion ($2.70 billion) for the six months ended March 31, compared with A$3.28 billion a year earlier.

Net interest margin - the difference between interest earned from lending and paid for deposits - rose 5 basis points from a year earlier to 1.96% at the end of March.

Westpac declared an interim dividend of 70 Australian cents per share, as compared with 61 Australian cents last year. ($1 = 1.4819 Australian dollars)