In the release notes
Older clients and servers interoperate transparently with 1.7 servers and
clients
…
Subversion 1.7 servers use the same repository format as Subversion
1.6. Therefore, it is possible to seamlessly upgrade and downgrade between 1.6.x and 1.7.x servers without changing the format of the
on-disk repositories
There is no need to do anything, your working copy will be upgraded, and will still be able to talk to the 1.6 server