We upgraded when in the same situation.
House we bought was probably too big for our requirements at the time but things change and now have a house I can safely say is a keeper until we eventually downsize.
BUT this was 11 years ago and things were quite different then.
I would move to somewhere larger now. As kids get older they might have less bulky toys but they need a bit more space - particularly once they hit their teens.
With the way things are going they could potentially be with you well into their 20's so having room is essential.
We did this a couple of years ago and it has worked really well. We did move into a small rented house for six months after selling our old house as that allowed us to be chain free buyers which was instrumental in buying our new place. The cash we had in the bank paid most of the rent (wife does not work so interest was tax free) so not that expensive to do.
I bought a bigger house in the 90s with a nice garden with thoughts of the kids. However they went out with their friends or down the lane to the river and fields. I was stuck with spending an hour and a half each time with a mower and a bigger house requiring more maintenance and money. I now live in a modest house right on a park (no road), loads of grass for someone else to cut, no mortgage (and a new wife). Result! Plan 1.
