Looking more at the pictures, I think your rack is meant for a 26" wheel bike, which is why it sits so low over a 700C tire.

Anyway, a good bike shop will be able to fit fenders to your bike, regardless of the rack. If the rack needs to be raised, they can put P-clamps on the ends of the seat stays and bolt the rack legs to those, which will raise the rack a bit. Or they can bend the cross piece of the rack a bit, as mentioned. Worst case, they can fit a different rack, e.g. a 700C sized rack.

If your bike were in my garage, I would simply cut and drill 1" pieces of flat aluminum bar stock and use those to extend the rack legs by 1/2".