I see you're only 26. If you think you'll ever want to have children, you need to put that into your equation. That more convenient city house may be great for when you're yuppies but may not be the neighborhood/schools that you want to raise kids in, so I'd looks at that aspect.
Now, if you LOVE the new house - everything about it is PERFECT for you, it's in a great school district, it's right where you'd want to be to raise kids - then I'd say go for it. Interest rates are about as low as they're gonna be right now, and the price difference is not that great IF you are getting other significant benefits with it. For instance, if you would have to spend $20k to renovate your current house into one that you like, versus the new house is already set up the way you like, plus you can save significantly on driving costs - well then, it may be worth it.
If, on the other hand, you're someone who would rather raise your kids in the country, or that in-town school district isn't as good or the neighborhood has higher crime - I'd stay put.
Just don't forget to calculate ALL the costs of moving into your analysis too. Real estate agent fees, costs to fix up the home you're selling, costs to decorate or fix things in the new house, moving costs. Make sure the new home is really worth the financial hit.