Mutch has been a regular for Malky Mackay's side and says the move is doing him a power of good.
"I'm ready for Birmingham whenever the manager wants me," he told the Birmingham Mail. "I will keep on pushing and pushing as best I can and hopefully it will come sooner rather than later.
"At the moment it's going great at Watford. We're doing well and there are a great set of lads at the club.
"I'm playing regular football and that's what I need. It's a good situation all round. When it comes to January, we will take things from there.
"What will happen, I'm not too sure. My contract finishes at the end of the season and we're talking to try and sort something out now.
"Hopefully that will be done as I'd love to re-sign. I don't plan on going anywhere else.
"Then it's down to the manager, whether he keeps me or I go out on loan again to keep improving and learning. We will have to wait and see."