In an interview with CVG Epic's Mark Rein states that he thinks Unreal Engine 3 will remain viable at the start of the next generation of consoles.
"I think if you were going to do a launch title for a future console, UE3 would probably be the way to go.", says Rein.
Unreal Engine 4 will not be there for the start of the generation as Rein explains: "The UE4 stuff is very futuristic. UE3 is really the horse for this year."