The People says City have moved to the head of the queue to sign Loach.
Tottenham boss Harry Redknapp is preparing a further bid for the January transfer window - as revealed by Hotline two weeks ago - after having two offers rejected.
But now City boss Roberto Mancini is set to make an offer of around £3million and would consider loaning Loach, 22, back to the Hornets. With Shay Given desperate to leave, Mancini is stepping up his bid to sign Loach, who has twice been called into the England squad.
Manchester United, who need a replacement for Edwin van der Sar who retires at the end of the season, are also keeping tabs.