Rising interest rates and declining profits were forecast today for the remainder of 1979 by Virginia savings and loan officials at their annual convention here at the Greenbrier Hotel.

Vincent A. Sweeney, chairman of the board of governors of the Virginia Savings and Loan League, predicted net income would be off between 25 and 33 percent from last year. He said that increased interest rates on passbook accounts and four-year certificates of deposit, scheduled to go into effect July 1, would force a rise in mortagage loan rates. Most Virginia S&Ls, he added, plan to offer the new certificates, which carry near market interest rates on balances as low as $1,000.

To offset these higher costs, the Federal Home Loan Bank Board recently authorized federal S&Ls to offer variable rate mortgages. However, Virginia law, which forbids non-fixed interest rates on single family residential loans, will prevent S&Ls in that state from marketing them, according to the league's executive director, Mark Saurs.

He said the industry intends to ask the Virginia legislature to amend the law when it reconvenes next year, but conceded oposition is expected from consumer groups.

Despite the sobering outlook expressed by these officials after the morning session, the mood at the convention was upbeat. Speakers presented patriotic and motivational messages about the role of S&Ls in helping persons to realize the great American dream of owning a home.

Sweeney urged Congress to provide tax incentives for savers, to void double taxation of dividends, and to revive the spirit of private enterprise by decreasing government spending.

Lee Kendall, president of Mortgage Guarantly Insurance Corp. and a former economist for the U.S. League of Savings Associations took a different tack. Instead of betting on the government, he called for self-reliance and cited S&Ls' successful marketing record in the past.

He outlined the growing competition the industry faces from money market funds, municipally owned funds, government-backed mortgage bonds, Treasury bills, notes and other investments being offered by the federal government, banks insurance companies, stockbrokers and soon even by Sears Roebuck. He urged the S&Ls to fight the competition with weapons like leverage funds to generate more loans, commercial paper and pooled funds for mortgage back securities.

Later, Saurs said Virginia S&Ls had discussed pooling funds last year without reaching an accord. "It was like getting 15 women to agree on how to bake a cake," he quipped.