There is a short moulded rubber tube which fits into a hole at the bottom of the heater box. This drains any water that collects in the bottom of the box and runs through a hole in the floor. Yes. this can be a leak from the matrix and if so you will often be able to smell the anti-freeze, but can also be from heavy rain. Carefully check under the bottom edge of the heater inside the car, there is a small gap between the heater and the mat. If extra carpeting has been fitted it's easy to break it off or pop it out of the hole in the floor. If it has been broken off beware that if you try and replace it, that originally there is a small plastic sleeve fitted that makes the grommet part of the tube a snug fit in the hole to minimise leaks. Bottom of the box can be rusty. It's a pain to have to take the whole heater box out just to renew this part so pushing the broken bit up into the box and then fitting a new one with some sealant is a method that can be used. Brookhouse has the tube but I doubt if it comes with the plastic piece.
http://www.classicvolvoparts.co.uk/p...7&page=A_Hoses
If it is the matrix then the box will have to come out anyway.
Make sure the drain pipe that runs down the side of the heater under bonnet is clear.