One of the reasons you love living in London is because you have that house. If you lived in the suburbs with a long train/tube commute you wouldn't love it as much. Plus it's apparently near a state school you want to send your kids to. (You are apparently currently paying both for private schools and a nanny?) Yes, you have a lot of exposure to a potential housing crash, but the non-financials seem worth it as long as you are still working in London. With family going to local schools, your other options are to stay in the same area but either downsize or buy a do-er upper and put in the sweat equity.
Will there be a housing crash in London? High-end in London is a global market, not a UK one, so if there is a crash in London there will have been a global crash, so probably have been nowhere better to put your money in any case. That's my view, anyway.
If you want to retire and stay in the same house, you need to pay off the mortgage (£350K) plus have 25 times your £60K annual living expenses when the house is free of mortgage. You currently have only(!) £600K in pension assets, so total additional savings required would be £1.25M. From next year you have £47K per year savings on the kids, plus whatever you are currently saving. How long will it take you to save that £1.25M, and is it worth it?
If you want to retire and move, MacBury's done the maths.
So, question is, not what your house is worth or what the London property market is doing, buy what do you really want to do with your life?