Can I downgrade my hosting plan before my one-year term is up?

It's possible, but....

Hosting packages are discounted (usually 50%) based on a one-year commitment. If you were break the commitment mid-term then your account would loose the one-year term status and would be recalculated at the monthly rate, without the discount. That could still result in a net credit but, of course, depends on how many months were remaining on your one-year term. The closer you are to completing your one-year term, the less sense it makes to downgrade.

Upgrading is another matter. You can upgrade anytime without loosing your term-discount status.