Home buyers aren't the only ones hurt by rising mortgage rates. The jump in rates is also reshaping the rental market in the Twin Cities.

During the first three months of the year, the average vacancy rate across the metro fell nearly a full percentage point to 3.6%, according to a quarterly report from Marquette Advisors. When including empty units in new buildings that are still being leased, the vacancy rate was still only 4.4%.

Mortgage interest rates started climbing earlier this year, eroding housing affordability in the Twin Cities, especially for lower-income buyers. On Thursday, Freddie Mac said the average 30-year fixed-rate mortgage rose to 5.27%, the highest since 2009 and more than two percentage points compared with a year ago.

"It's definitely not good news for renters," said Sue Speakman-Gomez, president of Twin Cities-based non-profit HousingLink. "That keeps people in the rental market. If you don't have people moving out of rentals into homeownership, there's not as much room within the rental market to house everyone."

With fewer empty apartments to fill, property managers have been able to increase rents slightly. The average rent across the metro was $1,382, a 2.1% increase from the previous quarter and 4.9% higher than a year ago.

Suburbs saw the strongest rent growth, with an annual gain of 5.4%, compared with 4.5% in Minneapolis and 2.6% in St. Paul.

A new report from HousingLink showed that while March rents on one-bedroom apartments in Minneapolis declined slightly compared with last year, three-bedroom rents increased 5%.

Those larger rentals tend to be occupied by families that stay in them much longer than people in smaller apartments, said Speakman-Gomez.

"It continues to be very challenging for low-income and moderate-income households. We just don't have enough housing," she said. "People are still struggling to find that place that's affordable for their family."

Though apartment vacancy rates increased last year, especially in Minneapolis and St. Paul, it was far from enough to offset the deep shortage of lower-income rentals, said Speakman-Gomez. She said a vacancy rate of about 7% is necessary to create enough openings to ease the shortage of apartments that are affordable to low- and moderate-income families.

The Marquette report showed that the rental market has tightened, especially in the suburbs where the vacancy rate during the first quarter was only 3.1% compared to 4.5% in Minneapolis and 5.1% in St. Paul.

Minneapolis, where rental demand softened the most over the past year, showed some of the strongest gains. The vacancy rate fell to 4.5% at the end of March from 6.8% at the same time last year. St. Paul saw only a very modest decline.

With higher mortgage rates making the cost of homeownership in the Twin Cities more expensive, renting is becoming a more viable option for many. Brent Wittenberg, vice president at Marquette, said in a statement that large numbers of aging Millennials and young families are now seeking larger rentals, especially townhomes and single-family homes.

Marquette reported that the average vacancy rate in townhouses was just 1.9% at the end of March, down from 2.1% a year ago.