What will cost them more? Well supported and easy to use UE4 or waiting for Tabata to finalize open-world focused FF15 engine [that they cannot easily give to partners who are needed to make FF7R a reality]?
Unreal Engine licensing is an aggressive business contract, it's very obvious that Square Enix can make their own in-house 3d engines.
Add to the conspiracy that "Final Fantasy VII" and "remake" even if it's a timed exclusive on PlayStation 4, basically equals $$$!!
From a certain perspective it doesn't make sense to go for UE as Square Enix can simply_wait until "Luminous" or whatever is completed and the next FFXV game is released.
Specially considering that PS4 was touted and marketed to death as being "easier to dev for" which is true but it's also a cliche because a current gen 3d engine still takes an average of two to three years and considering that evaluation/prototype PS4/Xbone hardware had to have been available much earlier or comparable PC-dev kits.
This is a fan-pleaser to cash in...no doubt it will be good and ugh...although I loathe "episodic" I'm betting that like the multiple CD-Roms, you are basically in a virtual CD-Rom disc episode which may be broken down further...perhaps if each disc-episode (I'm not saying it's all discs as much as DLG) and you got a "sure thing profit"
I don't buy the hype that UE is better or "easier", it helps Epic even if they gave away a free license due to free hype...it's probably more important to wonder how sales would be and what the sales targets are...
Timed PS4 then Xbone then PCs means that episodes will have waves of sales across platforms (possible NX later?)
It's all business...it will be pretty and good/great but if in house it's obvious it would be technologically superior and more profitable.
Namco Bandai is already making a Teen game... I'm not anti-Unreal Engine but it's obvious these companies can make their own engines plus current consoles are already blatantly "easier to dev for" (using the..marketing)
As for Frostbite 2 while it's true it was made for Battlefield 3 didn't Need for Speed use it last gen? That means if the last gen lasted a couple more years that EA would have transitioned some games over to Frostbite...
That said Frostbite went to version 3 and version 3.5 with Battefront right? Current gen consoles are now two years old which means next year's E3-16 will have a bigger lineup and more mature dev tools.
Crisis Core, Dissidia, and other elements is probably what's really delayed Square Enix more than their in-house 3d engines because getting those gameplay mechanics to work, specially when they have some internal target vision to work.