How to show that every $\alpha$-Hölder function, with $\alpha>1$, is constant?
Derivatives are not needed here (which is a good thing since proofs based on them can lead to erroneous arguments, see the accepted answer for an example)...
Choose $y\gt x$ in the interval $(a,b)$. For every $n\geqslant1$, divide the interval $(x,y)$ into $n$ subintervals $(x_i,x_{i+1})$ of length $x_{i+1}-x_i=(y-x)/n$. By hypothesis, for every $i$, $$|f(x_i)-f(x_{i+1})|\leqslant M(x_{i+1}-x_i)^\alpha=M(y-x)^\alpha n^{-\alpha},$$ hence, by the triangular inequality, $$|f(x)-f(y)|\leqslant \sum\limits_{i=1}^n|f(x_i)-f(x_{i+1})|\leqslant M(y-x)^\alpha n^{1-\alpha}.$$ If $\alpha\gt1$, the RHS goes to zero when $n\to\infty$ because $n^{1-\alpha}\to0$, hence $f(x)=f(y)$, QED.
Hint: Show that $f'(y)$ exists and is equal to $0$ for all $y$. Then as usual by the Mean Value Theorem our function is constant.
HINT: Your idea is a good one. What happens when you divide the inequality by $|x-y|$?