My initial reaction as a 54 year old, who paid their mortgage off 2 years ago was "oh good grief no". The peace of mind of having paid it off, and being able to top up my pension and "afford" my teens and the COL is immense.
HOWEVER - as an adult child whose DM moved to the next village 3 years ago, my reaction is "YES, yes, of course that makes sense". It has been brilliant for dm and dc to have a "day to day" relationship (my dad died a long time ago), but she does live literally 6 or 7 mins walk away.
If you're going to move to be more involved in your daughter and grandson's lives, then you need to be there for it to really make a difference. An hour's drive is still a drive away, it's still time to find to travel, it's not popping in for a coffee as you walk past with the dog, it's not "would you mind picking up Fred, I'm stuck in traffic". It's unlikely to be every parents' assembly, or nativity or school concert. An hour's drive becomes a bigger deal in the winter, snow and ill health. It'll be too far for your grandson to walk to you in his way home from high school.
It is wonderful to have DM living less than a mile away - this cuts both ways, as she has needed a lot of medical attention since moving here. "Closer but not actually local" would have not been that helpful to anyone at all. It's maybe really Sunday lunch once a month.
As your grandson gets older his free time will be limited. Once he starts school, it'll be limited to after 4pm and school holidays. Weekends suddenly get full of swimming lessons, sports fixtures and birthday parties.
Also - have you got any other children? How would they feel if you move closer to your daughter (I am 1 of 4; 2 of my siblings are still salty that DM "chose" me).
If you're going to move, do everything you can to be local to your daughter; preferably walking distance. Or stay where you are. Anything in between is a bit pointless.