Manchester City believe their England forward Raheem Sterling will sign a new deal at the Etihad before the summer.

Sterling’s current contract is due to expire in 18 months’ time and he had been toying with a move to Spain, playing for Barcelona or Real Madrid.

However, the City forward has had a change of heart and is set to commit his future to the Premier League leaders.

The decision follows an improvement in Sterling’s relationship with City manager Pep Guardiola, who left the 27-year-old out of the team for much of the second half of last season.

The England forward has had strained dealings with Guardiola since the end of last season, when an inquiry about why he was being repeatedly left out of the starting XI led to a heated discussion in which Sterling claimed other players were given preferential treatment.

Sterling will still wait to see how much game-time he is given over the next few weeks before committing to the club he joined from Liverpool for £49million seven years ago.

But in a significant development, he has accepted for the first time that he will not leave City this month.

Sterling caused ructions at City in October by saying he was open to a transfer to get more game-time and he has often spoken of his interest in playing abroad.

But with Barcelona and Real Madrid in financial difficulty, he appears to be coming to the conclusion that such a move is unlikely to materialise.

City want the situation resolved before the end of the season because they have a policy of not letting major assets enter the last year of their contracts. Talks with Sterling’s representatives should begin next month.