Used of domestic, single phase transformer are mainly for the increasing, of distributon efficiency, by reducing the losses(equipment and line losses) and to obtained proper planning eazily, for balanced loading on main three phase transformer with possible zero return neutral current, with minimum investment possible, with increased reliability of supply, as the faulty section could be isolated easily when needed.
If The Neutral Conductor opens, Break or Loose at either its source side (Distribution Transformer, Generator or at Load side (Distribution Panel of Consumer), the distribution system’s neutral conductor will “float” or lose its reference ground Point. The floating neutral condition can cause voltages to float to a maximum of its Phase volts RMS relative to ground, subjecting to its unbalancing load Condition.
The effect of use of domestic transformer is two fold one is the type and quality of the transformer installed and the other is the type of load i,e. the utilization.
For the first case if the transformer is single phase(between ph and neutral) the load will also be single phase and if the load is appreciable compared to the current capacity of distribution system it may introduce unbalancing in the 3 phase system. Even for three phase transformer with single phase loading may affect the power system balance but more serious issue will be if the transformer core tend to saturate near working voltage, as the core saturation will cause introduction of higher harmonics in the line.
So far as the load is concerned it will affect the system if the load is of low power factor and connected to rectifier load. As pointed out by Remi Cornwall, with half wave rectifier unbalanced load is build up. But even if full wave rectifier is used and the output is connected to capacitor filter, the circuit will generate current impulse during capacitor charging in each cycle causing infiltration of lot of high frequency interference's in the distribution line. This could be dangerous so far as EMI and EMC is concerned.
If all these aspects are taken care of, we find nothing wrong in using domestic transformers.
The other commenters have added very important and relevant comments. One important consideration is that the distribution transformer serves as the nominal last interface between the customer and the utility. Distribution transformers have higher impedance that power transformers which is important in limiting the impact of customer side faults on the grid and vice versa. However, if not constrained by design, the more efficient units have slightly lower impedance. Hence problems related to faults are not reduced as effectively by these units. A suggestion would be that impedance be specified for distribution transformer applications.